Tax Court addresses dueling motions to dismiss

The Tax Court granted the IRS’s motion to dismiss a taxpayer’s case for lack of jurisdiction because the taxpayer’s petition was not timely filed and denied the taxpayer’s motion to dismiss the case for lack of jurisdiction because the deficiency notices at issue were invalid.

Background 

On Jan. 30, 2022, Jordan John O’Neill filed a Tax Court petition seeking judicial review of two notices of deficiency, one for the 2016 tax year and one for the 2017 tax year. The IRS made a motion to dismiss the case for lack of jurisdiction, contending that O’Neill was time–barred from challenging the notices because his petition had been filed more than 90 days after the issuance of the 2016 notice on March 4, 2019, and the 2017 notice on Aug. 5, 2019. O’Neill filed an objection to the motion, arguing that the IRS had failed to provide proof of timely mailing of the notices and that the notices were invalid because they were not issued by an official with delegated authority to do so.

IRS motion to dismiss: To support its motion, the IRS submitted to the Tax Court both notices of deficiency issued to O’Neill, along with two U.S. Postal Service (USPS) Forms 3877, Firm Mailing Book for Accountable Mail. USPS Form 3877 is used by bulk senders of certified mail to document all items mailed on a given day. It lists recipients’ names, addresses, and corresponding certified mail tracking numbers. Each USPS Form 3877 the IRS submitted included a USPS date stamp and listed a certified mail tracking number, along with O’Neill’s name and address that matched the information on both notices. However, both forms did not include signatures from the USPS employees who received the items to mail and information about the total number of pieces that the IRS was sending by certified mail on that specific day. 

The Tax Court, in June 2023, denied the IRS’s motion in part, holding that the presumption of official regularity did not apply because of the defects in the submitted USPS Forms 3877. The Tax Court made clear that the partial denial did not mean that the IRS might not eventually prevail in the case. Rather, it stated, “Our ultimate decision on this issue will depend on the credibility and persuasiveness of what [O’Neill] and [the IRS] offer into evidence at trial.”

Because the defective USPS Forms 3877 provided a sufficient basis to deny the IRS’s motion in part, when it did so, the Tax Court did not address O’Neill’s second argument that the notices were invalid because they were improperly issued by an official without delegated authority. 

Subsequent motions to dismiss and evidentiary hearing: In May 2024, O’Neill also filed a motion to dismiss for lack of jurisdiction in Tax Court. He contended in his motion that the notices of deficiency were invalid because of improper mailing and issuance by an improper authority.

In an evidentiary hearing, the IRS introduced new material to bolster its case. In addition to the two notices of deficiency and the corresponding USPS Forms 3877, the IRS introduced official USPS tracking histories for each notice generated based on their respective certified mail tracking numbers, confirming the mailing date of the notices, the unsuccessful attempts at delivery, and their eventual return to the IRS due to being unclaimed.

Additionally, the IRS submitted records from its internal Automated Underreporter (AUR) system, including verified screenshots from the “Case History” and “Statutory Notice History” windows, that corroborated the issuance date of the notices, the mailing address used, the certified mail tracking numbers, and the final delivery status. Finally, the IRS provided certified transcripts from its Integrated Data Retrieval System, confirming that O’Neill’s last known address remained unchanged from 2010 to 2022. The IRS then asked the court to allow it to resubmit its motion to dismiss for lack of jurisdiction because of the additional evidence, and the court granted its request.

O’Neill did not submit any new evidence or challenge any of the IRS’s descriptions or characterizations of its new evidence. Given the opportunity to address the Tax Court, he only discussed his argument that the notices were invalid because they were issued by an official with a lack of delegated authority and did not discuss the issue of proper mailing of the notices. When the IRS asked for leave to file a renewed motion to dismiss, he stated: “I would object to [the IRS’s] motion in light of the delegation order argument for 2016 and 2017,” and after the IRS filed its motion, O’Neill filed an objection to it.

The Tax Court’s decision

The Tax Court held that the notices had been properly mailed to O’Neill, his Tax Court petition had not been filed within the 90–day period required under Sec. 6213(a), and the notices of deficiency were valid. Accordingly, it granted the IRS’s motion to dismiss for lack of jurisdiction.

O’Neill was challenging the validity of the notices, and the IRS was challenging the timeliness of O’Neill’s petition filing. The Tax Court explained that it is a court of limited jurisdiction and may exercise jurisdiction only to the extent expressly authorized by Congress. The party invoking jurisdiction has the burden of proof that the court has jurisdiction. There are two prerequisites to the court’s jurisdiction to redetermine a deficiency: (1) the issuance of a valid notice of deficiency by the IRS and (2) the timely filing of a Tax Court petition by the taxpayer.

O’Neill and the IRS did not dispute that O’Neill’s petition was filed more than 90 days after each of the notices of deficiency was issued. Accordingly, the Tax Court found it was required to dismiss this case as untimely under Sec. 6213(c) unless it determined that the notices were invalid because they were either improperly mailed or improperly issued by an official lacking delegated authority. If it determined they were, the court was also required to dismiss the case on the basis that the notices were invalid.

The Tax Court first considered O’Neill’s challenge to the validity of the notices. In deficiency cases, the Tax Court has held that the IRS bears the burden of proving that a notice of deficiency was mailed to the taxpayer. The act of mailing the notice is generally proven by documentary evidence of mailing or by evidence of the IRS’s mailing practices corroborated by direct testimony. Exact compliance with USPS Form 3877 mailing procedures raises a presumption of official regularity in favor of the IRS, while, if there are defects in the USPS Form 3877, the form will not give rise to a presumption of regularity.

O’Neill contended that the IRS could not meet the burden of proving proper mailing because of the incomplete USPS Forms 3877. In addition to not listing the total number of items or including a signature, O’Neill observed that the USPS Forms 3877 failed to identify the listed items as notices of deficiency and failed to list the associated tax years. The court found that because of these defects, the presumption of regularity did not apply.

However, the Tax Court found that the IRS might still prevail if the evidence of mailing was otherwise sufficient. While not sufficient to create a presumption of official regularity, the court determined, citing its own and appellate precedent, that even a USPS Form 3877 with defects is probative and may be combined with additional evidence to meet the IRS’s burden in this situation.

In O’Neill’s case, both USPS Forms 3877 for the notices bore a USPS date stamp reflecting the same date of issuance listed on the respective notices. Also, each USPS Form 3877 listed O’Neill’s name, his address, and the certified mail article number exactly as they were listed on the corresponding notices. In addition, importantly to the court, the IRS was no longer relying solely on the USPS Forms 3877 to verify proper mailing, as it had in its prior motion to dismiss. It had submitted multiple items into evidence, including certified USPS tracking records as well as internal records that confirmed that the notices were mailed on the dates listed on them to O’Neill’s last known address.

The Tax Court further found that the evidence showed that delivery had been attempted but that both notices had not been claimed and ultimately had been returned to the IRS, which was strong evidence to the court that the notices were mailed. It stated, “Logic dictates that an item cannot be returned as unclaimed unless it was first mailed” (quoting Alamo, T.C. Memo. 2017–215, aff’d, 751 F. App’x 583 (5th Cir. 2019)).

Moreover, although there was no evidence to establish any deliberate refusal of delivery of the notices by O’Neill, the Tax Court found he could not use the fact that they went unclaimed to later assert that the notices were never mailed to him. Finally, the court noted that the IRS submitted internal transcripts confirming that O’Neill’s last known address remained the same from 2010 to 2022, the time during which the IRS mailed the notices, and O’Neill did not argue that this address was incorrect.

In the Tax Court’s view, as it had stated when partially denying the IRS’s first motion to dismiss, the ultimate decision on the issue depended on the credibility and persuasiveness of what O’Neill and the IRS offered into evidence at trial. The court found that O’Neill had not offered anything into evidence at trial, and he had not made any arguments challenging the mailing, beyond repeatedly articulating the defects within the USPS Forms 3877. In contrast, the IRS had provided evidence that was credible and persuasive. Consequently, the court concluded that the IRS’s evidence was sufficient to establish proper mailing.

Procedural validity of the notices of deficiency: O’Neill also maintained that the notices of deficiency were invalid because of their issuance by the IRS’s AUR system. As the Tax Court has held, a valid petition is the basis of its jurisdiction, and to be valid, a petition must be filed from a valid statutory notice (Stamm Int’l Corp., 84 T.C. 248, 252 (1985)). The Ninth Circuit has also held that a notice of deficiency should reflect a “thoughtful and considered determination” that the government is owed an amount not paid and, further, that “the word ‘determination’ irresistibly connotes consideration, resolution, conclusion, and judgment” (Scar, 814 F.2d 1363, 1368—69 (9th Cir. 1987)).

In Kelley, T.C. Memo. 2023–126, the Tax Court concluded that notices of deficiency issued by the AUR system reflected a thoughtful and considered determination made by a duly authorized delegate of the Treasury secretary. As the notices of deficiency issued to O’Neill were like those in Kelley, the court held that the notices issued to him reflected a thoughtful and considered determination made by a duly authorized delegate of the Treasury secretary, and thus they were valid.

Timeliness of petition filing: According to the Tax Court, in a case seeking the redetermination of a deficiency, its jurisdiction depends, in part, on the timely filing of a petition by the taxpayer. Sec. 6213(a) generally provides that the petition must be filed with the Tax Court within 90 days after a notice of deficiency is mailed, addressed to a person within the United States. The court found that, under Sec. 7482(b), O’Neill’s case “presumably” was appealable to the Ninth Circuit, which has held that the 90–day deficiency deadline is jurisdictional.

In its motion to dismiss, the IRS asserted that O’Neill’s petition had not been filed within the 90–day period prescribed by Sec. 6213(a). While he filed an objection to the IRS’s motion, O’Neill did not dispute that the petition was filed late. Instead, he focused exclusively on the validity of the notices of deficiency, reiterating his argument that the notices were issued by the AUR, which is not a delegated authority, an argument that, as discussed above, the court had already addressed and found “to be wholly without merit.”

O’Neill also argued that the Tax Court was unilaterally deciding to hold him, but not the IRS, accountable to the prescribed rules, regulation, and procedural time frames. The court found, however, that it was not acting unilaterally, that its jurisdiction in the deficiency context was limited to those cases in which a petition is timely filed, and that it had no authority to extend the 90–day deadline in Sec. 6213(a). Therefore, O’Neill had failed to establish that his petition was filed within the required 90–day period. Accordingly, it granted the IRS’s motion to dismiss for lack of jurisdiction and denied O’Neill’s motion to dismiss for lack of jurisdiction.

Reflections

While O’Neill’s case would have ended up dismissed regardless of whether the Tax Court granted his or the IRS’s motion, because the court held that the notices of deficiency issued to O’Neill were valid, he continues to be liable for the deficiencies in them. Although the court determined, citing McKay, 89 T.C. 1063 (1987), aff’d, 866 F.2d 1237 (9th Cir. 1989), that it did not have jurisdiction to consider O’Neill’s case on the merits, it held, following its decision in Sheldon, 63 T.C. 193 (1974), that it had jurisdiction to determine the reason why it did not have jurisdiction.

O’Neill, T.C. Memo. 2025–49