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When is a deadline real and when is it extended by unusual circumstances? This issue is at the heart of Boechler, P.C. v. Commissioner of Internal Revenue, 20-1472, which was decided by the Supreme Court on April 21, 2022.

The Supreme Court carefully examined the language of IRC Code 6330 — looking for a clear statement from Congress that it intended to create a jurisdictional limit that set a deadline to file a Tax Court petition after a collection of due process (“CDP”) Notice of Determination. In 2015, the Internal Revenue Service (IRS) had notified Boechler, a North Dakota law firm, of a discrepancy in its tax filings. When Boechler did not respond, the IRS assessed an “intentional disregard” penalty and proceeded to levy Boechler’s property. Boechler responded by requesting a CDP hearing before IRS Appeals, under which Boechler had 30 days to petition the Tax Court for review, but missed the deadline by one day. The petition was dismissed by the Tax Court for a lack of jurisdiction. Ultimately, the Eighth Circuit affirmed, finding that the 30-day filing deadline was jurisdictional and could not be equitably tolled. In a unanimous decision, the Supreme Court held that the CDP process determination was not a non-jurisdictional deadline subject to equitable tolling, a legal principle that evolved from the common law of equity. Equitable tolling states that the statute of limitations will not bar a claim if the plaintiff, despite reasonable care and diligent efforts, did not discover the injury until after the limitations period had expired.

The doctrine of equitable tolling means only that the running of the statute is suspended, not that the limitations period begins over again. Thus, even if the limitations period was suspended during the pendency of the initial suit, it would have resumed after the first suit was dismissed. Equitable tolling also means that a person is not required to sue within the statutory period if he or she cannot in the circumstances reasonably be expected to do so. Dixson v. United States, 1999 U.S. App. LEXIS 13215 (10th Cir. Okla. 1999).

In Boechler, the IRS argued that in 1998, Congress intended to make CDP filing deadlines jurisdictional and not subject to equitable tolling. The Supreme Court not only rejected the argument but dismissed any deference to the IRS’s authority. Following a taxpayer victory in Boechler, it is expected taxpayers will now challenge the 90-day requirement to file a petition in Tax Court following the issuance of a notice of deficiency.

In the Supreme Court Opinion written by Justice Amy Coney Barrett, the Court notes that jurisdictional requirements mark the bounds of the Court’s authority. These requirements cannot be waived or forfeited and do not allow for equitable exceptions. However, a procedural requirement is jurisdictional only if Congress “clearly states” that it is. In addition, the Court concluded there was nothing at Code Section 6330 which expressly prohibited equitable tolling.

In the tax world, there is an expectation that Boechler will result in more taxpayers challenging jurisdictional limitations — some taxpayers with a detailed explanation for the reason of late filing. It is likely that some of these responses will make clear that the taxpayers do not fit in the court’s criteria for equitable tolling. Clearly the Tax Court has the need to determine what is appropriate and what constitutes equitable tolling. The Supreme Court has described “equitable tolling as a traditional feature” of American jurisprudence in the background principle against which Congress drafts limitations. Lozano, 72 U.S. at 10-11. Because we do not understand Congress to alter the backdrop lightly, non-jurisdictional limitations periods are presumptively subject to equitable tolling. Irwin v. Department of Revenue of Veterans’ Affairs, 498 U.S. 89, 95-96 (1990).

In applying the general principle of equitable tolling to the CDP statute, the Supreme Court said “[W]e see nothing to rebut the presumption here. Section 6330(d)(1) does not expressly prohibit equitable tolling, and its short, 30-day time period is directed at the taxpayer, not the court. …The deadline also appears in the section of the tax code that is “unusually protective” of taxpayers and a scheme in which “laymen, unassisted by trained lawyers” often “initiate the process.” Sebelius v. Auburn Regional Medical Center, 568 U.S. 145, 154 (2013). This context does nothing to rebut the presumption that non-jurisdictional deadlines can be equitably tolled.” Boechler, 568 U.S. at 160.

The Supreme Court’s decision sends the Boechler law firm back to the Tax Court which will now decide if the late petition meets the equitable tolling tests. Because the Tax Court has previously determined all of its deadlines for hearing cases are jurisdictional, it has not developed a body of law on equitable tolling. Undoubtedly, it will now look to equitable tolling jurisprudence developed in other jurisdictions that did not bar its consideration.

The courts have generally developed three bases for applying equitable tolling: 1) the IRS actively misleading taxpayers about the filing deadline; 2) extraordinary circumstances which prevent taxpayers from timely filing, and 3) timely filing petitions in the wrong forum.

One of the first cases that the Tax Court may hear is the Castillo v. Commissioner case which has been held by the Second Circuit awaiting the decision in Boechler. The case involves taxpayer Josefa Castillo, who has yet to receive her CDP notice of determination even though it was mailed by the IRS to her last known address more than two years ago — postal records show it had never been delivered. As a result, she filed her CDP petition late after finding out about the CDP notice of determination through an informal channel long after the deadline for filing passed. Castillo should provide the Tax Court with an opportunity
to grant equitable tolling and develop its jurisprudence on this issue. Undoubtedly, taxpayers will seek the benefit of equitable tolling and the Tax Court will have the opportunity over the next few years to set the standards it will apply in equitable tolling.

Phil Jelsma is a partner and chair of the tax practice team at Crosbie Gliner Schiffman Southard & Swanson (CGS3) — a Southern California-based commercial real estate law firm.