Equitable tolling in a corner of the Internal Revenue Code

If a taxpayer is late in seeking judicial review in a tax proceeding known as a “collection due process” case, the U.S. Tax Court has the power to excuse the missed deadline for equitable reasons, the Supreme Court ruled on Thursday in a unanimous decision.

The case, Boechler v. Commissioner of Internal Revenue, arose after the Internal Revenue Service notified Boechler, P.C., a North Dakota law firm, of intent to levy on Boechler’s property to satisfy a tax penalty. After the IRS Independent Office of Appeals sustained the levy, Boechler sent a petition one day late to request review in the Tax Court. The time for sending such a petition for review is set forth in Section 6330(d)(1) of the Internal Revenue Code, which states that a “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).”

The government argued that Section 6330(d)(1) is jurisdictional, so that equitable tolling – the legal principle that allows courts to “toll,” or extend, deadlines in some circumstances – would not apply under Irwin v. Department of Veterans Affairs. In an opinion authored by Justice Amy Coney Barrett, the court rejected the government’s argument. It held instead that the statute is not jurisdictional, and that equitable tolling is an available argument in Tax Court.

Grammar – or more specifically, lack thereof – was key to the court’s decision. The statute provides for jurisdiction over “such matter,” but does not say what “such matter” is. The problem is an unclear antecedent. Not only does the statute fail to provide an antecedent “matter” for “such matter” to connect to, it also fails to provide any antecedent noun for “such matter” to connect to. As the court explained, “Both parties cope 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 crack the puzzle, not even in conjunction with the application of a nearest-antecedent rule. Other features of the provision’s text, structure, and context similarly fail to provide clarity. Some statutory sentences may be susceptible to sentence diagrams. But this one is not.

From this starting point of grammatical confusion, the opinion flows logically to its conclusion — a holding that will allow a principle of equity to make nice adjustments to at least one corner of a complex modern statute.

The court explains that under its precedent, including United States v. Kwai Fun Wong, a procedural requirement is jurisdictional only if the statute provides a “clear statement” of jurisdiction. Although “magic words” are not required, under Sebelius v. Auburn Regional Medical Center, clarity is. “[T]he jurisdictional condition must be just that: clear. And … the Commissioner’s interpretation is not,” Barrett wrote. The presence of the word “jurisdiction” is not enough. The statute must provide “a clear tie between the deadline and the jurisdictional grant.”

The court rejected an argument from the government that Section 6330(d)(1) must be jurisdictional because a related provision that authorizes suspension of levy actions provides a clearer statement of jurisdiction. It also rejected the argument that Congress intended Section 6330(d)(1) to be jurisdictional because Congress was aware of case law that treated as jurisdictional IRC Section 6213, which provides a key limitations period regarding Tax Court review of deficiency determinations. As the oral argument also revealed, the court appears to hope that its clear statement 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 non-jurisdictional. And when a time limit is non-jurisdictional, Irwin provides a presumption that it is subject to equitable tolling.

The government argued in Boechler that equitable tolling should be unavailable for collection due process proceedings because it is unavailable for the IRC Section 6511 deadline for taxpayers to submit refund claims under United States v. Brockamp, a unanimous 1997 decision. But the court rejected the government’s argument. Brockamp, wrote Barrett, involved a statute with more “emphatic” language and also with six listed exceptions, which evidenced that Congress did not intend to subject Section 6511 to additional exceptions in equity. Also, Section 6511 has relevance in many more cases; it is a “central provision of tax law.”

Boechler shows that the court seeks to find the right line in deciding when equity can adjust the complex and detailed scheme that is the federal tax statute. On the one hand, it seeks to follow its precedent, which says that limitations periods are presumed non-jurisdictional absent a clear statement of jurisdiction (under Kwai Fun Wong); and that non-jurisdictional periods are presumed subject to equitable tolling unless Congress intends otherwise (under Irwin).

On the other hand, the court’s decision in Boechler applies to a “limited and ancillary” category of tax cases. The court is careful to distinguish the question of whether equitable tolling may apply to broader, more central limitations periods – like Section 6511’s limitations period for submitting refund claims or Section 6213’s limitations period for challenging notices of deficiency. And it leaves open the government’s ability to claim that administrative concerns weigh against equitable tolling for more “central” limitations periods.

Equitable tolling isn’t easy to obtain. For instance, in Irwin, although the court allowed the plaintiff to argue for equitable tolling, it refused to toll the limitations period. Instead, it explained, the facts in Irwin related to “a garden variety claim of excusable neglect.”

What would merit equitable tolling? The Tax Court is about to work this question. One amicus brief presented as a promising equitable tolling example the case of Josefa Castillo, a taxpayer whose case in the U.S. Court of Appeals for the 2nd Circuit was placed on hold pending the outcome in Boechler. According to the brief, Castillo did not know (despite diligent efforts to find out) that the IRS was incorrectly assessing her for tax on the earnings of a business she had long since sold. Following Boechler, Castillo and other cases should begin to build a body of CDP equitable tolling precedent.

Boechler thus opens the door to an equity exercise worth watching at the Tax Court. The Tax Court had concluded repeatedly and unanimously that Section 6330(d)(1) was jurisdictional. Now, the Supreme Court has instructed the Tax Court to change course, dust off some old books, and rediscover the law of equitable tolling. This is news not just for tax lawyers, but also for private law scholars who advocate reacquainting courts with the tools of equity beyond the capacity to issue injunctions. Post-Boechler, the Tax Court will test and demonstrate how old equitable concepts might adjust the results of technical modern statutes.