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The Supreme Court of the United States on Thursday issued a 9-0 unanimous opinion in favor of a taxpayer and against the IRS in a case about the interpretation of a confusing statutory deadline.
In the case stylized as Boechler, P.C. v. Commissioner of Internal Revenue, the taxpayer, a law firm in Fargo, North Dakota, was notified by the IRS that there was a discrepancy in their 2015 tax filings.
For one reason or another, Boechler never responded to the initial notice. The agency subsequently issued an “intentional disregard” penalty along with their intent to seize and sell off the law firm’s property in order to satisfy that newfound government debt.
Boechler responded to that intent-to-seize-and-sell notice and requested a collection due process hearing with the IRS Independent Office of Appeals in order to stop their property from being levied.
Taxpayers are afforded the right to such hearings–to challenge the government’s overall scheme or at least to offer alternative methods that don’t involve the wholesale seizure of their property. And, if they disagree with the disposition, taxpayers are granted recourse by way of the Tax Court where they can petition for a review of their case.
A federal statute offers some murky guidance about such appeals:
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).
Boechler filed his appeal one day after the IRS signed off on the levy. The Tax Court dismissed based on lack of jurisdiction. Next, the tax payer appealed to the U.S. Court of Appeals for the Eighth Circuit–which affirmed the Tax Court’s jurisdictional argument. Boechler then filed a petition for writ of certiorari with the nation’s high court.
What might, at first blush, appear to be an easy win for the federal debt collection agency actually turns on both the language of the statute and the principle of equitable tolling. That principle, sourced from the common law, holds that statutes of limitations can be avoided if the plaintiff was not or could not have been aware of their injury until after the limitations period expired. But, relevant to the case (and generally), equitable tolling can be avoided if a court simply lacks jurisdiction to hear a case at the outset.
The jurisdictional dispute took center-stage here.
To hear the IRS tell it, the 30-day deadline to file a petition bears directly on whether the Tax Court itself has jurisdiction over any given case. Boechler, however, argued the first part of the sentence in the statute and the parenthetical operate independently of one another.
“As we see it, the text does not clearly mandate the jurisdictional reading,” Barrett writes for the unified court. “It is hard to see how it could, given that ‘such matter’ lacks a clear antecedent.”
The opinion goes on to explain that the statute is not very clearly a “slam dunk” for Boechler because it is exceedingly unclear and says that “such matter” could also apply to any number of things not cited by either party in their arguments before the court.
“Where multiple plausible interpretations exist—only one of which is jurisdictional—it is difficult to make the case that the jurisdictional reading is clear,” Barrett says, insisting that tying the two portions of the statute together is hardly the only way to read it.
The opinion then elaborates on the logic of deconstructing the law:
Nothing else in the provision’s text or structure advances the case for jurisdictional clarity. The deadline, which appears in the first independent clause of the sentence, explains what the taxpayer may do: “The person may, within 30 days of a determination under this section, petition the Tax Court for review of such determination.” The jurisdictional grant, which appears in a parenthetical at the end of the sentence, speaks to what the Tax Court shall do: “(and the Tax Court shall have jurisdiction with respect to such matter).” As explained above, this language can be plausibly construed to condition the Tax Court’s jurisdiction on a timely filing. But the condition would not be express and would be found in a parenthetical, which is typically used to convey an “aside” or “afterthought.”
Addressing an IRS complaint that they might be bogged down if they have to start allowing equitable tolling under such circumstances, the court says that the agency’s concern is likely overblown.
“The [IRS] Commissioner protests that if equitable tolling is available, the IRS will not know whether it can proceed with a collection action after §6330(d)(1)’s deadline passes,” Barrett notes. “We are not convinced that the possibility of equitable tolling for the relatively small number of petitions at issue in this case will appreciably add to the uncertainty already present in the process.”
The opinion goes on to say the equitable tolling issue will be fact-intensive and likely not to burden the agency’s overall goals to secure payment for lawfully-assessed penalties because “it is not as if the IRS can confidently rush to seize property on day 31 anyway.”
While a definite loss for the IRS, the victory is only conditional for the taxpayer in this case.
“None of this is to say that Boechler is entitled to equitable tolling on the facts of this case,” Barrett says. “That should be determined on remand. We simply hold that §6330(d)(1)’s filing deadline, like most others, can be equitably tolled in appropriate cases.”
[image via Jim Lo Scalzo-Pool/Getty Images]
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