The U.S. Tax Court: 1 Day Late

In many ways the U.S. Tax Court is a court and operates like other courts. But in other ways, the U.S. Tax Court is more akin to a government agency. This quasi-court status has raised a number of interesting issues about how to litigate a case in tax court and what standards apply and what exactly the court can and cannot do.

In Boechler, P.C. v. Commissioner, 142 S.Ct. 1493 (2022), the U.S. Supreme Court recently told the U.S. Tax Court that it has the power to do more than it thought. The Boechler case involved a taxpayer who filed a case in the U.S. Tax Court but was late in making the filing.

The Supreme Court’s decision in Boechler opens the door to challenges for every other type of deadline before the U.S. Tax Court. And with tax cases, there are a whole host of arbitrary deadlines that can be challenged–which could mean a whole host of disputes and litigation for an already busy tax court.

This brings us to the Hallmark Research Collective v. Commissioner, 159 T.C. No. 6, case. It addresses whether filing a U.S. Tax Court petition in a deficiency proceeding one day late results in the tax court not having jurisdiction to hear the case.

Facts & Procedural History

The facts, in this case, are pretty simple. This case involves a late-filed return for 2015 and an unfiled tax return for 2016. The IRS issued a Notice of Deficiency to the taxpayer for both years.

The taxpayers had 90 days to file a petition with the U.S. Tax Court. The taxpayers filed the petition on the 91st day.

The tax court asked the parties to explain why the case should not be dismissed for the late filing, which resulted in the current court opinion.

About the U.S. Tax Court

As noted above, the U.S. Tax Court is a “court” in many respects and it has the power to render decisions in certain types of tax cases, but it is not a court in other respects. It is more like a government agency.

The U.S. Tax Court is an Article I court, not an Article III court. This refers to the authority in the U.S. Constitution upon which the court was established. Article I courts are created by Congress. These courts answer to the president of the United States as the president appoints and can remove the judges–which is not true of Article III courts. Article III courts are independent of the legislature and the executive branch.

The U.S. Tax Court generally applies the Federal Rules of Evidence, but it has its own procedural rules. The court does not necessarily follow the rules of civil procedure as Article III courts do.

The majority of taxpayers do not hire attorneys to represent them in matters before the U.S. Tax Court. Attorneys are almost always required in Article III courts.

There are other nuances (which you can read about here).

The State Equivalent

To understand how the U.S. Tax Court fits within the tax system, one can look to how the individual states have set up their system of tax administration and the U.S. Tax Court’s state equivalent.

Most states have a state tax board or, for the State of Texas, the State Board of Administrative Hearings. These state boards fulfill the same function as the U.S. Tax Court in their state tax systems (and the U.S. Tax Court was previously called the Board of Tax Appeals, which is similar to the naming convention many states use for their equivalent agency). Unlike the U.S. Tax Court, for most states, these quasi-judicial boards do not try to be courts. They are clearly government agencies.

Why Does it Matter?

The distinction between a government agency vs. a court is important as the manner in which an agency and a court function is different.

While a government agency can largely choose to ignore procedural rules (particularly if the deviation benefits the citizen who is seeking redress), the courts cannot. The courts have very little leeway when it comes to following established procedural rules.

For example, the IRS Office of Appeals is an agency. It is clearly not a court and does not try to be a court. IRS Appeals can decide to hear just about any tax dispute that is brought to it. It does not have to refuse to consider cases that are filed late, that do not have written protests that fail to follow the technical requirements for a proper filing, etc. It has the discretion to take up just about any case it wants to in order to carry out its mandate. A court has none of these options.

This brings us back to the decision in this case. In this case, the U.S. Tax Court is articulating why it believes that it cannot consider a case that has a petition that is filed one day late.

The court’s opinion starts by citing rules that apply to “courts.” It even cites Article III and Article III concepts–even though the court is not an Article III court. The court’s option then goes through a lengthy discussion of “jurisdictional rules” vs. “procedural rules” given the U.S. Supreme Court’s ruling in Boechler, P.C. v. Commissioner, 142 S.Ct. 1493 (2022). In Boechler the Supreme Court concluded that the U.S. Tax Court could hear a particular type of case, a collection due process hearing case, that was filed late. The U.S. Tax Court in the present case goes to great lengths to explain why the current type of case, i.e., a deficiency case, is different than the type of case brought by the taxpayer in Boechler. The court’s opinion makes the case that the U.S. Tax Court is a court and not a government agency.

The U.S. Tax Court has even ruled after this case that filing a petition 11 seconds late is invalid.

The Takeaway

The consequence is that deficiency cases are jurisdictional and, as such, the tax court cannot hear them if they are filed late. It is not clear whether the taxpayer will appeal this case and what will happen, but deficiency cases, like this one, are the primary type of case that the U.S. Tax Court hears. Pending that appeal or additional guidance, taxpayers who are late in filing their tax court petitions may still want to file them even if they are late.

Also, those with non-deficiency cases who missed their filing deadlines may also want to consider whether they can be filed late. This includes overpayment or refund cases under I.R.C. § 6512(b)(1), employment status redetermination cases under I.R.C. § 7436, innocent spouse relief cases under I.R.C. § 6015(e), whistleblower cases under I.R.C. § 7623(b)(4), declaratory judgment cases under I.R.C. § 7476 and I.R.C. § 7477(a) and I.R.C. § 103 and I.R.C. § 6166, interest abatement cases under I.R.C. § 6404(b), administrative cost recovery cases under I.R.C. § 7430(f), and passport cases under I.R.C. § 7345(e).