July 26, 2023
Third Circuit reverses Tax Court, holds deadline for redetermination petition is not jurisdictional and is subject to equitable tolling
In Culp v. Commissioner, the US Court of Appeals for the Third Circuit (appeals court) reversed an earlier decision of the Tax Court and held that the 90-day filing deadline under IRC Section 6213(a) for redetermination of a deficiency is not jurisdictional. In addition, the appeals court held that the deadline is subject to equitable tolling and remanded the case back to the Tax Court to determine whether the taxpayers were entitled to that relief.
In 2017, the IRS sent the Culps a notice of deficiency. Under IRC Section 6213(a), taxpayers have 90 days to file a petition for redetermination of the deficiency, starting on the date the IRS mails the notice. When the Culps did not respond to this notice and another one in 2018, the IRS levied on their property, collecting from their Social Security payments and 2018 tax refund.
The Culps then filed a petition disputing the deficiency determination under IRC Section 6213(a). The Tax Court dismissed the petition for lack of jurisdiction, finding that the petition was untimely because it was not filed within the required 90 days.
Arguments and analysis
Non-receipt of notice
The Culps argued that they never received the notice, so the 90-day clock never started running. The appeals court rejected this argument, saying that there was proof the notice was mailed, and receipt of the notice was not required to start the clock running.
The Culps also argued that the IRC Section 6213(a) deadline was not jurisdictional, but instead was a claims-processing rule; as such, the Tax Court could consider their petition.
In support of the Culps, the appeals court cited a recent Supreme Court decision holding that the deadline to file a petition to review a collection due process determination under IRC Section 6330(d)(1) is a non-jurisdictional deadline subject to equitable tolling (Boechler, P.C. v. Commissioner, 142 S. Ct. 1493, 1497 (2022)). If the Supreme Court found the IRC Section 6330(d)(1) deadline was not jurisdictional, the appeals court said, then the IRC Section 6213(a) deadline was also not jurisdictional.
The appeals court also noted that Congress knew how to limit the scope of the Tax Court’s jurisdiction but did not address untimely redetermination petitions in the statute.
Addressing whether its holding would preclude a refund suit, the appeals court said, “this situation presents itself only if a taxpayer files a late petition for redetermination of a deficiency, the Tax Court dismisses his or her petition, the taxpayer then pays the disputed deficiency, files for a refund, gets denied, and then sues in federal court challenging the denial. That theoretical possibility seems seldom, if ever, to occur … “
The appeals court also held that the IRC Section 6213(a)’s deadline may be equitably tolled. The appeals court said the Culps had not forfeited or waived the argument because the Tax Court only addressed whether the deadline was jurisdictional, so they never had to raise this claim.
In support of the Culps, the appeals court said that non-jurisdictional limitations periods are presumptively subject to equitable tolling, and there was nothing in the case law, legislative history or text of the statute to suggest otherwise. In addition, the appeals court said the IRS “overstated” the argument that permitting equitable tolling would be difficult to administer. “We doubt our holding will encourage more taxpayers to file untimely petitions in the (longshot) hopes of bringing a successful equitable tolling argument,” the appeals court said.
The court remanded the case back to the Tax Court to decide whether the Culps were entitled to the equitable tolling of their claim.
A different opinion
While Culp was pending in the Third Circuit, the Tax Court held in Hallmark Research Collective v. Commissioner, 159 T.C. No. 6 (2022), that a petition filed one day after the filing deadline was untimely because the IRC Section 6213(a) deadline is jurisdictional. The Tax Court said that the reasoning in Boechler does not apply in the context of IRC Section 6213(a). The Tax Court also found that IRC Section 6213(a) gives the Tax Court jurisdiction over deficiency cases and clearly states that the 90-day filing deadline is jurisdictional.
The Third Circuit’s decision in Culp runs counter to many decades of tax jurisprudence and sets up a conflict among the circuits. While taxpayers in the Third Circuit can rely on the result in Culp, other taxpayers should still consider the 90-day rule under IRC Section 6213(a) to be jurisdictional, consistent with precedent outside of the Third Circuit and the recent Hallmark case. It remains to be seen whether the Supreme Court will intervene to resolve this conflict among the circuits.
Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor