The United States Supreme Court unanimously ruled on Thursday in favor of a taxpayer and against the Internal Revenue Service in a case involving the interpretation of a perplexing statutory deadline.
In the case stylized as Boechler, P.C. v. Commissioner of Internal Revenue, the taxpayer, a Fargo, North Dakota-based law firm, was notified by the IRS that their 2015 tax filings contained an error.
Boechler never responded to the initial notice for whatever reason. The agency then issued a “intentional disregard” penalty and announced their intention to seize and sell the law firm’s property to satisfy the newly acquired government debt.
Boechler responded to the IRS’s notice of intent to seize and sell their property by requesting a collection due process hearing with the IRS Independent Office of Appeals.
Taxpayers are entitled to such hearings in order to contest the government’s overall scheme or to propose alternative methods that do not involve wholesale seizure of their property. Additionally, if taxpayers disagree with the disposition, they have recourse through the Tax Court, where they can petition for a rehearing of their case.
Federal law provides some ambiguous guidance on such appeals:
Within 30 days of a determination made under this section, the person may petition the Tax Court for review (and the Tax Court shall have jurisdiction with respect to such matter).
Boechler filed his appeal the same day the IRS approved the levy. The Tax Court threw out the case due to a lack of jurisdiction. Following that, the taxpayer filed an appeal with the United States Court of Appeals for the Eighth Circuit, which upheld the Tax Court’s jurisdictional argument. Boechler then petitioned the nation’s highest court for a writ of certiorari.
What appears to be an easy victory for the federal debt collection agency turns on both the statute’s language and the principle of equitable tolling. This principle, derived from common law, holds that statutes of limitations can be avoided if the plaintiff was unaware of their injury or could not have known about it until after the limitations period expired. However, and most importantly in this case (and generally), equitable tolling can be avoided if a court initially lacks jurisdiction to hear a case.
The jurisdictional conflict took center stage in this case.
According to the IRS, the 30-day deadline for filing a petition has a direct bearing on whether the Tax Court has jurisdiction over a particular case. Boechler, on the other hand, contended that the first part of the statute’s sentence and the parenthetical operate independently.
“As we read the text, we conclude that it does not clearly mandate a jurisdictional reading,” Barrett writes for the unified court. “It’s difficult to see how it could, given the absence of a clear antecedent for’such matter.'”
The opinion continues by stating that the statute is not a “slam dunk” in favor of Boechler due to its extreme ambiguity and that “such matter” could also refer to any number of other things not mentioned by either party in their arguments before the court.
“Where multiple plausible interpretations exist—only one of which is jurisdictional,” Barrett says, insisting that tying the two sections of the statute together is far from the only way to read them.
The opinion then elaborates on the logic underlying the law’s deconstruction:
Nothing else in the text or structure of the provision makes a case for jurisdictional clarity. The deadline, which appears in the sentence’s first independent clause, clarifies the taxpayer’s options: “A person may petition the Tax Court for review of a determination made under this section within 30 days of the determination.” The jurisdictional grant, which appears in parentheses at the end of the sentence, refers to the duties of the Tax Court: “(and the Tax Court shall have jurisdiction over such matter).” As previously explained, this language could reasonably be interpreted to condition the Tax Court’s jurisdiction on timely filing. However, the condition would be implicit and would be contained within a parenthetical, which is typically used to convey a “aside” or “afterthought.”
In response to an IRS complaint that they may become stymied if they are forced to begin allowing equitable tolling in such circumstances, the court concludes that the agency’s concern is most likely exaggerated.
“The [IRS] Commissioner protests that if equitable tolling is available, the IRS will be unsure whether it can pursue collection action after the deadline specified in 6330(d)(1) has passed,” Barrett notes. “We are not convinced that the possibility of equitable tolling for the relatively few petitions at issue in this case will add significantly to the process’s already high level of uncertainty.”
The opinion continues by stating that the equitable tolling issue will be fact-intensive and is unlikely to impair the IRS’s overall goal of securing payment for lawfully assessed penalties, as “it is not as if the IRS can confidently rush to seize property on day 31 anyway.”
While the IRS has a certain loss in this case, the taxpayer has a conditional victory.
“None of this is to say that Boechler is entitled to equitable tolling in this case,” Barrett writes. “That is something that should be determined on remand. We simply hold that, like the majority of other statutes, 6330(d)(1filing )’s deadline can be equitably tolled in appropriate cases.”