Supreme Court sweeps away rule in tax collection due process practice
ARTICLE | May 13, 2022
Authored by RSM US LLP
In Boechler, P.C. v. Commissioner, No. 20-1472 (S. Ct. Apr. 21, 2022), the U.S. Supreme Court recently granted a narrow procedural victory to a taxpayer that was a day late in filing a petition in the U.S. Tax Court challenging an IRS Notice of Determination upholding a collection action.
The IRS notified the taxpayer (a law firm), of its intent to levy the firm’s property to satisfy a tax penalty. The taxpayer requested a collection due process (CDP) hearing pursuant to section 6330(a)(3)(B). The hearing officer sustained the levy and issued a notice of determination. The taxpayer filed a petition in Tax Court challenging the IRS’s proposed collection action. However, the Tax Court dismissed the petition citing its long-standing case law interpreting the 30-day deadline to file as jurisdictional. Section 6330(d)(1) reads:
The person may, within 30 days of a determination under [IRC 6330], petition the Tax Court for review of such determination (and the Tax Court shall have jurisdiction with respect to such matter).
The Tax Court dismissed the case for lack of jurisdiction because it was filed a day late. The Court also stated the 30-day period is jurisdictional and could not consider equitable reasons for tolling the deadline. On appeal, the U.S. Court of Appeals for the Eighth Circuit affirmed the Tax Court’s ruling (967 F.3d 760 (8th Cir.2020)).
The taxpayer appealed to the U.S. Supreme Court and, in a unanimous decision, the Court held that section 6330(d)(1)’s 30-day deadline to file a petition for review of a collection due process determination is not jurisdictional. In other words, the Tax Court could consider granting equitable relief for tolling the deadline. In stressing the importance of clear statutory language when determining jurisdiction, the Court admitted that the government may have offered a ‘better’ interpretation of the statute’s wording. However, the Court stressed that ‘better’ language does not equate to ‘clear’ language. Because the language was not “clear” that a deadline was critical to the Tax Court’s jurisdiction, the Court held that the Tax Court had jurisdiction and could consider waiving the 30-day procedural requirement for filing the petition.
The Supreme Court refrained from determining whether the law firm was entitled to equitable tolling on the facts of the case and remanded to the Tax Court for this determination. While this is an important victory for taxpayers, it could also prove to be narrow. In other contexts, federal courts have granted equitable relief only sparingly where the litigant filed the complaint in the wrong court or could show that the untimely filing was induced or tricked by the adversary. Equitable tolling may not apply in cases of professional ‘neglect.’ In this case, the law firm must still convince the Tax Court to grant relief.
Next step for Taxpayers
Although this was an important advance for taxpayers, to ultimately prevail, a taxpayer must convince a court to grant equitable relief, which could be hard to do for taxpayers represented by qualified professionals. The Supreme Court case opens the door for providing more relief to taxpayers that are less sophisticated or did not have professional representation at the time.
Call us at (800) 627-0636 or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by RSM US LLP and originally appeared on 2022-05-13.
2022 RSM US LLP. All rights reserved.
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Lewis, Hooper & Dick, LLC is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.
For more information on how Lewis, Hooper & Dick, LLC can assist you, please call 1-800-627-0636.