We are pleased to announce that Steven Toscher , Sandra Brown and Jonathan Kalinski will be speaking at the upcoming Strafford webinar “Taxation of Cannabis: Overcoming Tax Challenges in Cannabis Business Operations, Key Planning Techniques,” Tuesday, January 17, 2023, 10:00 a.m. – 11:30 a.m. (PST).

The sale and distribution of cannabis for recreational or medical use has become a powerful economic engine generating billions in annual revenue with 33 states and the District of Columbia having some form of legalization of the substance. Despite state relaxation of marijuana prohibition laws, without careful planning, the taxation of regulated cannabis businesses can result in hefty tax assessments and penalties.

Cannabis businesses are accounting for and reporting the results of their operations with gross receipts, cost of goods sold (COGS), and other deductions just like other for-profit businesses. However, as long as marijuana remains a Schedule 1 controlled substance under federal law, these businesses must navigate the pitfalls of complex federal and state tax rules.

Under Section 61, all gross income must be reported from whatever source it is derived. However, under Section 280E, cannabis businesses cannot deduct rent, wages, and other expenses unless it is for COGS, resulting in a substantially higher tax rate than other companies on their income. This dilemma has been the subject of recent tax court cases and appeals.

Listen as our panel discusses federal and select tax rules impacting the cannabis industry, recent tax court cases, Section 280E, forfeiture, banking, and other related issues.

We are also pleased to announce that we will be able to offer a limited number of complimentary and reduced cost tickets for this program on a first come first serve basis. If you are interested in attending, please contact Sharon Tanaka at sht@taxlitigator.com. 

Click Here for more information.

We congratulate the lawyers at our firm who have been honored by the

California Board of Legal Specialization of the

State Bar of California

with acknowledgment of at least 20 years of continued professional participation and advancement as

Certified Specialists in Taxation Law

HSTP is proud to encourage its lawyers to seek and maintain professional excellence by participating in the certification process to become and maintain the standards necessary to be publicly designated as a Certified Specialist in Taxation. 

We also recognize our distinguished lawyers, Avram Salkin and Michel Stein who have volunteered their time in past years by serving on the Board of Legal Specialization, both as Members and Chairs during their respective tenures.  

Posted by: Steven Toscher | December 28, 2022

USC Gould School of Law 70th Tax Institute – January 23-25-2023

Please join us January 23-25, 2023 for the USC Gould School of Law 2023 Tax Institute at the Millennium Biltmore Hotel, Los Angeles.  This is the Institute’s 70th year and the firm is proud to continue our participation.

Meet with fellow tax practitioners and address the cutting-edge tax issues affecting all tax professionals.  This three-day institute includes discussions, networking opportunities and workshops led by the best tax professionals in the nation, covering corporate taxes, partnership and individuals taxes and estate planning topics.

Steven Toscher will again be chairing the Enforcement, Compliance and Ethics track Tuesday afternoon and we are looking forward to the following topical programs including members of our firm — –

Handling Tax Cases Before the California Office of Tax Appeals

Featuring Dennis Perez

Getting Ready for Partnership Income Tax Examinations

Featuring Michel Stein

The Future of IRS Enforcement in Light of the

Inflation Reduction Act of 2022

Featuring Sandra Brown

In addition , Evan Davis of our office will be featured on the following panels-

Protecting the Privilege in Tax Matters: It is

Becoming More Difficult


Compliance with the Corporate Transparency Act

Click Here for the Brochure

Click Here to Register

In Green Valley Investors, LLC v. Commissioner, 159 T.C. No. 5 (Nov. 9, 2022), the Tax Court invalidated Notice 2017-10, which designated syndicated conservation easements as listed transactions, because it was a legislative rule that was issued without complying with the notice and comment provisions of the Administrative Procedures Act (“APA”).  We recently blogged on the Tax Court’s decision.  See, https://www.taxlitigator.com/wp-content/uploads/2022/11/Blog-The-Tax-Court-Gives-a-Primer.pdf.   

Less than a month after the Tax Court published its opinion, the IRS issued a Notice of Proposed Rulemaking and Notice of Public Hearing on a proposed regulation on “Syndicated Conservation Easement Transactions as Listed Transactions” as Treas. Reg. §1.6011-9.  87 Fed. Reg. 7185 (Dec. 9, 2022).  While this may appear to be a concession of error by the IRS in issuing a listed transaction notice without following notice and comment rule making procedures, Part 7 of the Preamble to the Notice of Proposed Rulemaking states that Treasury and the IRS disagree with Green Valley Investors , but:

… to eliminate any confusion and ensure consistent enforcement of the tax laws throughout the nation, the Treasury Department and the IRS are issuing these proposed regulations to identify certain syndicated conservation easement transactions as listed transactions for purposes of all relevant provisions of the Code and Treasury Regulations.

These proposed regulations inform taxpayers that participate in syndicated conservation easement transactions, and substantially similar transactions, and persons who act as material advisors with respect to these transactions, and substantially similar transactions, that, once these proposed regulations are published in final form, those taxpayers and material advisors must disclose the transactions in accordance with the final regulations and the regulations issued under section 6011 and 6111. Material advisors must also maintain lists as required by section 6112. Prior to the date these regulations are published as final regulations, it is the position of the Treasury Department and the IRS that disclosure and list maintenance requirements for syndicated conservation easement transactions identified as listed transactions in Notice 2017-10 continue to be in effect, other than in the Sixth Circuit. In addition, taxpayers, including taxpayers in the Sixth Circuit, who have filed a tax return reflecting their participation in a syndicated conservation easement transaction before the final regulations are published and who have not disclosed the transaction pursuant to Notice 2017-10 will be required to file a disclosure statement within 90 calendar days after the date on which the final regulations are published if the period of limitations for the transaction remains open. Material advisors also have disclosure and list maintenance obligations with respect to such transactions.

      In other words, we can expect that the IRS will continue to advocate, outside of the Sixth Circuit, that Notice 2017-10 is valid and will continue to assert penalties against taxpayers and material advisors who fail to file disclosure statements and material advisors who fail to maintain lists. 

The Preamble to the proposed regulations discusses:

  • The reportable transaction “regime;”
  • The duty of participants to disclose reportable transactions and the penalties for failing to disclose;
  • The duty of material advisors to disclose reportable transactions and maintain lists and the penalties for failing to disclose and maintain lists;
  • Tax-exempt entities as parties to prohibited tax shelter transactions;
  • Provisions of IRC §170 relating to conservation easements;
  • Notice 2007-10;
  • The purpose of the proposed regulations; and
  • An explanation of the rules.

             Other than Part 7, discussed above, the part of the preamble that I found of interest was Part 4, concerning tax-exempt entities involvement in prohibited tax shelters.  IRC §4965 was enacted to deter tax-exempt entities from facilitating prohibited tax-shelter transactions, including listed transactions.  A tax-exempt entity which facilitates a prohibited tax shelter transaction by reason of its tax-exempt, tax-indifferent, or tax-favored status, and its managers are subject to an excise tax and the entity is subject to certain reporting and disclosure obligations.  Part 4 contains a detailed discussion of the taxes under §4965 to which a tax-exempt entity and its managers could be subjected and the disclosure and reporting requirements imposed on tax-exempt entities that are parties to tax shelters.

Note: the essence of syndicated conservation easement transactions is the donation of an easement to a tax-exempt entity.  This would seem to make those entities subject to the §4965 excise tax.  The proposed regulation does not list tax-exempt entities to whom conservation easements are donated as participants in the transaction and expressly excludes them from such treatment.  Thus, a tax-exempt entity will not be subjected to the §4965 excise tax for its role as the donee of an easement. 

            The regulation defines as syndicated conservation easement transaction as one in which:

  • A taxpayer receives promotional material (which can be written or oral) offering investors in pass-through entities the possibility of a charitable contribution deduction that is equal to or greater than 2.5 times the investment in the pass-through;
  • The taxpayer acquires, directly or indirectly through one or more tiers of pass-through entities an interest in a pass-through entity that owns real property;
  • The pass-through entity that owns the real property contributes an easement on such property, which it treats as a conservation easement, to a qualified organization and allocates, directly or through a pass-through, a charitable contribution deduction to the taxpayer; and
  • The taxpayer claims a charitable contribution deduction with respect to the conservation easement on a federal income tax return.

The regulation also defines (a) a charitable contribution deduction relating to a conservation easement; (b) promotional materials; (c) qualified organizations (which includes governmental entities other than the United States) and (d) real property.

Under the 2.5 times investment rule, if the promotional material suggests a range of possible charitable contributions, the highest amount will determine if the 2.5 times requirement is met.  There is a rebuttable presumption that the 2.5 times rule is met if, within 3 years of the taxpayer’s investment, the pass-through entity that owns the real property allocates a charitable contribution deduction to the taxpayer that is equal to or exceeds 2.5 times the taxpayer’s investment.  The proposed regulation also has an “anti-stuffing rule” under which, if the investment in the pass-through is allocable in part to property on which a conservation easement is placed and in part to other property, whether the 2.5 times rule is met will be based solely on the part of the investment allocable to the property on which the conservation easement is placed.

The proposed regulation lists the parties who will be considered participants in a syndicated conservation easement transaction: (1) the owner of a pass-through entity; (2) a pass-through entity; and (3) any other taxpayer whose federal income tax return reflects the tax consequences of or a tax strategy arising from the syndicated conservation easement transaction.

Comments on the proposed regulation must be received by the IRS by February 6, 2023; requests to attend the public must be received by 5 p.m. ET on February 27, 2023; and the public hearing will be held by teleconference on 10:00 a.m. ET on March 1, 2023.   According to the Regulations.gov website, one comment on the proposed regulation has already been submitted.

It is also of interest that in the Preamble to the above proposed regulation, the IRS also makes clear that, while not involving Syndicated Conservation Easement Transaction, it also doesn’t agree with the adverse ruling issued in Mann Construction, Inc. v. United States, 27 F.4th 1138 (6th Cir. 2022) (holding that Notice 2007-83, designating as a listed transaction certain trust arrangements using cash value life insurance, was invalid for failing to follow APA’s notice and comment rulemaking procedure).  So why hasn’t the IRS issued proposed regulations designating as a listed transaction the transaction described in Notice 2007-83?  Two possible reasons: first, the notice was issued 15 years ago and the trust transactions involved are not prevalent any longer; second, the Tax Court is a court of national jurisdiction and is the court which is handling the syndicated conservation easement cases while the Mann Construction decision is only binding in the Sixth Circuit.  Note that since the enactment of the Tax Cut and Jobs Act in 2004, the IRS has issued only six listed transaction notices, four of which were issued more than a dozen years ago.  The number of cases involving listed transactions other than syndicated conservation easements may be few and far between.

Again, it should be expected that the IRS will continue to argue in cases outside the Sixth Circuit that Notice 2017-10 (and other listed transaction notices including 2007-83) is exempt from the APA’s notice and comment rulemaking provisions, possibly in the hope that there will be a conflict in the circuits and the Supreme Court will ultimately resolve whether listed notice transactions are subject to the APA’s notice and comment rulemaking procedures.  It would save time and money if in the future the IRS follows the APA in issuing listed transactions notices.  The APA has several exceptions to the notice and comment rulemaking procedures, including good cause exception where following the procedure would be “impracticable, unnecessary, or contrary to the public interest.”  The Tax Court in Green Valley Investors noted that the IRS expressly waived reliance on this exception.  

Robert S. Horwitz is a Principal at Hochman Salkin Toscher Perez P.C., former Chair of the Executive Committee of the Taxation Section, California Lawyers’ Association, a Fellow of the American College of Tax Counsel, a former Assistant United States Attorney and a former Trial Attorney, United States Department of Justice Tax Division.  He represents clients throughout the United States and elsewhere involving federal and state administrative civil tax disputes and tax litigation as well as defending clients in criminal tax investigations and prosecutions. In 2022 the Tax Section of the California Lawyers Association awarded him the Joanne M. Garvey Award for lifetime achievement in and contributions to the field of tax law. Additional information is available at http://www.taxlitigator.com.

We are pleased to announce that Steven Toscher has been elected as a board member of the Tierra Del Sol Foundation. Tierra serves people of disabilities through creative pathways to employment, education and the arts by empowering Tierra associates to lead productive and personally meaningfully lives. The Firm and Steve have been long time supporters of Tierra, which is a great opportunity to give back—benefiting Tierra’s worthy associates and building a stronger community and better society for all of us.

Click Here to Read More.

Click Here for More Information on the Foundation

Posted by: Steven Toscher | December 15, 2022

Happy Holidays from Hochman Salkin Toscher Perez P.C.

We are pleased to announce that Cory Stigile and Philipp Behrendt, will be speaking at the upcoming BHBA webinar “The Ins and Outs of Tax Audits,” Tuesday, January 10, 2023, 12:30 p.m. – 1:30 p.m. (PST).

This program will go over the fundamentals of tax audits in order to provide business owners, entrepreneurs, and practitioners with the tools and language they need to navigate the maze of an audit situation. The IRS audit rate will rise as a result of the new funds from the Inflation Reduction Act; thus, this program will familiarize you with what to expect and prepare you for the various types of audit situations.

Click Here for More Information

This week many of us are attending the ABA 39th Annual National Institute on Criminal Tax Fraud & Tax Controversy in Las Vegas. It has been a tradition of our firm to attend and participate in this great conference and I am very pleased that some of our lawyer attendees took the time to participate in the Tax Court’s pro Bono calendar call this morning. Thank you Sandra Brown for leading and coordinating our participation with Gary Markarian, Michael Greenwade and Philipp Behrendt.

In Boechler v Commissioner, 596 U.S. ___, 142 S.Ct. 1493 (2022), the Supreme Court held that the 30-day period for petitioning the Tax Court to review a collection due process determination was not jurisdictional and, therefore, could be equitably tolled. Following the Boechler decision, several bloggers, including me, questioned whether the time period of filing a petition for redetermination of a deficiency under IRC §6212(a) was jurisdictional.  In Hallmark Research Collective v. Commissioner, 159 T.C. No. 6 (Nov. 29, 2022), the Tax Court rejected the notion that the time period is not jurisdictional.  Before discussing the Hallmark Research case, a bit of background.

A. The Supreme Court Cases on Statutory Filing Deadlines

For the past two-plus decades the Supreme Court has endeavored to “bring some discipline” to the use of the term “jurisdictional” for statutory filing deadlines. Gonzalez v. Thaler, 565 U.S. 134, 141 (2012).  Under the Supreme Court’s recent jurisprudence, statutory deadlines are presumptively nonjurisdictional and are subject to equitable tolling unless Congress has made a clear statement that the deadline is jurisdictional. United States v. Kwai Fun Wong, 575 U.S. 402, 409 (2015). Congress must clearly state that a threshold limitation on a statute’s scope shall count as jurisdictional (Gonzalez v. Thaler, 565 U.S. 134, 141 (2012)) and absent such a clear statement, courts shall treat the time restriction as nonjurisdictional. Sebelius v. Auburn Reg’l Med. Ctr., 568 U.S. 145, 153 (2013)).   While Congress is not required to “incant magic words,” traditional tools of statutory construction must plainly show that Congress imbued a procedural bar with jurisdictional consequences. United States v. Kwai Fun Wong, 572 U.S. 402, 410 (2015).

An exception also exists if the “long line of this Court’s decisions left undisturbed by Congress attached a jurisdictional label to the prescription.” Fort Bend County v. Davis, 587 U.S. __, 139 S. Ct. 1843, 1849 (2019) (internal quotation marks omitted).  The Government must “clear a high bar to establish that a statute of limitations is jurisdictional.”  Kwai Fun Wong, supra

B. The Statutory Provisions Concerning The Tax Court’s Deficiency Jurisdiction

I.R.C. §6213 is entitled “Time for Filing Petition and Restriction on Assessment.”  Subsection (a) states

Within 90 days, or 150 days if the notice is addressed to a person outside the United States, after the notice of deficiency authorized in Section 6212 is mailed (not counting Saturday, Sunday, or a legal holiday in the District of Columbia as the last day), the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency. Except as otherwise provided in section 6851, 6852, or 6861 no assessment of a deficiency in respect of any tax imposed by subtitle A, or B, chapter 41, 42, 43, or 44 and no levy or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer, nor until the expiration of such 90-day or 150-day period, as the case may be, nor, if a petition has been filed with the Tax Court, until the decision of the Tax Court has become final.  Notwithstanding the provisions of section 7421(a), the making of such assessment or the beginning of such proceeding or levy during the time such prohibition is in force may be enjoined by a proceeding in the proper court, including the Tax Court, and a refund may be ordered by such court of any amount collected within the period during which the Secretary is prohibited from collecting by levy or through a proceeding in court under the provisions of this subsection. The Tax Court shall have no jurisdiction to enjoin any action or proceeding or order any refund under this subsection unless a timely petition for a redetermination of the deficiency has been filed and then only in respect of the deficiency that is the subject of such petition. Any petition filed with the Tax Court on or before the last date specified for filing such petition by the Secretary in the notice of deficiency shall be treated as timely filed.

            Section 6214(a) provides that “the Tax Court shall have jurisdiction to redetermine the correct amount of the deficiency, even if the amount so redetermined is greater than the amount of the deficiency, notice of which has been mailed to the taxpayer…”

C. Facts in Hallmark Research

Hallmark Research filed a late return for 2015 and did not file a return for 2016.  Under 6020(c), the I.R.S. prepared a substitute for return for 2016 and issued a notice of deficiency (“NOD”), which was sent by certified mail to Hallmark Research’s last known address.  The NOD listed September 1, 2021, as the last day for petitioning the Tax Court.

Hallmark Research e-filed a petition with the Tax Court on September 2, 2021, one day after the filing deadline.  Its’ petition stated that its’ CPA had contracted COVID.  The Tax Court issued an order to show cause why the petition should not be dismissed.  Hallmark Research requested that the Tax Court defer ruling until the Supreme Court issued its decision in Boechler.  The Commissioner opposed deferral.  The Tax Court did not defer ruling and dismissed the petition on April 1, 2022, for lack of jurisdiction.

On April 22, 2022, the Supreme Court issued its opinion in Boechler.  Relying on Boechler, Hallmark Research filed a motion to vacate the dismissal on the ground that the 90-day period for filing a petition under §6213(a) is not jurisdictional.  The Tax Court has consistently held that to maintain an action for redetermination of deficiency there must be (1) a valid NOD and (2) a timely filed petition.  Hallmark Research asked the Tax Court to review its prior cases in light of Boechler and “issue a new precedent on the section 6213(a) filing deadline.”  The Tax Court did so and concluded that Boechler does not apply to the 90-day deadline of §6213(a).

D. The Tax Court’s Analysis

The Tax Court began its analysis with a discussion of the distinction between time limits that are jurisdictional and those that are procedural.  If a time limit is jurisdictional, failure to comply strips the court of the power to hear the case.  Such a deadline cannot be waived or tolled, can be raised at any time and the court must enforce the deadline sua sponte.  If a time deadline is procedural and not jurisdictional, failure to file on time does not deprive the court of the power to hear the case; there is a presumption that the deadline can be equitably tolled and the defendant must raise a statute of limitations defense in its answer or it is waived.

Turning to history, the Tax Court noted that in 1919, Congress authorized the Commissioner to establish rules and procedures for administrative appeals of deficiencies and, in 1921, enacted provisions establishing administrative deficiency appeals procedures   This was insufficient, so in 1924, Congress established the Board of Tax Appeals (“BTA”) as an independent administrative agency to be a forum for hearing and resolving deficiency disputes.  The BTA was subsequently renamed the Tax Court of the United States and, in 1969, the Tax Court was made a court of record under Article I of the Constitution.  A deficiency as determined by the Tax Court “shall be assessed and shall be paid upon notice and demand.”  IRC §6215(a).

The Tax Court then turned to the statutory basis of its jurisdiction.  Under §7422, which has its roots in the 1926 Revenue Act, the Tax Court “shall have such jurisdiction as is conferred on them by this title” and by the 1926 Revenue Act and the 1939 Internal Revenue Code.  This statute does not, by itself, confer jurisdiction. 

According to the Tax Court, §6213(a) “does confer jurisdiction over deficiency case… .”  Section 6213 “is Congress’s mandate of the Tax Court’s deficiency authority and of it place within the federal tax system, and we must follow its directive.”  This required an examination of the statutory text.  The statute allows a taxpayer to postpose the assessment of a deficiency by filing a deficiency petition in the Tax Court within the 90-day period “and it thereby gives the Tax Court jurisdiction to adjudicate that petition.”  According to the Tax Court, no court “has ever questioned” the Tax Court’s deficiency jurisdiction or held that the source of that jurisdiction was any statute other than §6213(a).  The statutory text does not contain any statement that filing the petition within 90 days is a jurisdictional requirement.

The Tax Court then looked at the requirement for the mailing of a valid NOD, the “ticket” to Tax Court, which it termed a jurisdictional prerequisite.  Where a valid NOD is not issued, the Tax Court may be deprived of jurisdiction.  The statutory source of this requirement is the same statute that imposes the 90-day limitations period for filing a petition.  As stated in Laing v Commissioner, 423 U.S. 161, 165 n.4 (1976), a “deficiency notice is of import primarily because it is a jurisdictional prerequisite to a taxpayer’s suit in the Tax Court for redetermination of his tax liability.”  If the 90-day time limit is not jurisdictional, there would be no basis for claiming the issuance of a valid NOD is jurisdictional.  If §6213(a) does not contain jurisdictional requirements for a Tax Court deficiency case, then a NOD would not be required for a taxpayer to file a case in Tax Court.  That the 90-day limitation period is embedded in the same sentence as the provision requiring a valid NOD for Tax Court jurisdiction shows that the filing deadline is jurisdictional.  Laing dealt with jeopardy assessments.  While terming the NOD a “jurisdictional prerequisite,” the Court did not identify the statute that imbued it with jurisdictional significance.  It could have been referring to §6214(a), which grants the Tax Court jurisdiction to determine deficiencies and refers to the NOD.

The Tax Court found further support for its determination in the fourth sentence of §6213(a), which gives the Tax Court jurisdiction to enjoin the assessment or collection of tax or order a refund unless a timely petition was filed.  To the Tax Court, it would be odd to require a timely petition for jurisdiction to enjoin assessment or collection or order a refund but not for the predicate deficiency case.  This only strengthened the Court’s conclusion but did not clinch it.  The Tax Court does not discuss that where a time period is equitably tolled, a petition filed after the ninetieth day would be timely.

Turning to Congressional tinkering with §6213(a), the Tax Court noted that Congress amended the statute to provide that Sunday would not count toward the time limit, then extended the time period for taxpayers living abroad, then amended the statute to provide that Saturdays, Sundays and holidays would not count toward the time limit, and, finally, in 1998 added a provision requiring the I.R.S. to include in the NOD the last day for filing a petition and making this date a safe harbor.  According to the Tax Court, this showed that Congress recognized that the Tax Court did not have the power to equitably extend the filing deadline, which indicated that Congress viewed the filing deadline as jurisdictional.

The Tax Court next looked at §7459(d), which holds that where a petition has been filed, a decision dismissing the case “shall be considered as its decision that the deficiency is the amount determined by the Secretary” … “unless the dismissal is for lack of jurisdiction.”  The Court noted that the only times a petition could be dismissed for lack of jurisdiction is if the NOD wasn’t valid or the petition was untimely.  If a dismissal because the petition was not timely was not a dismissal for lack of jurisdiction, then it would be a decision on the merits upholding the deficiency.  While the IRS can still assess a deficiency if a petition is dismissed because the petition wasn’t timely, a taxpayer can pay the tax and sue for a refund.  If a dismissal based on a petition being untimely wasn’t for lack of jurisdiction, the taxpayer would not be able to maintain a subsequent refund suit. 

Section 7459(d) was originally §906(c), which was amended in 1928 to provide that a dismissal for lack of jurisdiction was not to be considered a determination of a deficiency.  This amendment was shortly after a BTA decision that discussed the effect of a dismissal for lack of jurisdiction and how this would not result in a deficiency determination notwithstanding §906(c).  To the Tax Court, it seemed strange for Congress to add this provision to address “as-yet-unrealized” bases for dismissing a case for lack of jurisdiction while ignoring the situations in which the Tax Court had dismissed a case for lack of jurisdiction, i.e., a late petition or no valid NOD.  That Congress reenacted this provision several times against a backdrop of caselaw interpreting the deadline for filing a petition as jurisdictional.

The Court reviewed the various acts that included versions of §6213(a): the 1924 Revenue Act; the 1926 Revenue Act; the 1934 Revenue Act; the 1939 Internal Revenue Code; the 1942 Revenue Act; the 1945 International Organizations Immunities Act; the 1954 Internal Revenue Code; the 1969 Tax Reform Act; the 1986 Tax Reform Act; and the 1998 Internal Revenue Service Restructuring and Reform Act.  After each of these enactments, the Tax Court and the courts of appeal consistently held that the filing of a timely petition was jurisdictional.  The legislative history of the 1998 Act states that if a “petition is not filed within that time period [90 days after issuance of the NOD], the Tax Court does not have jurisdiction to consider the petition.”  The 1998 Act amended §6213(a) to require the I.R.S. to include on NODs the last date for filing the petition, and thus “Congress communicated to taxpayers that the last day to file a deficiency petition is indeed the last day, thereby indicating … that the deadline is imbued with jurisdictional significance and is exempt from equitable exceptions.”  Since then, all the courts of appeal that have considered the issue have held the time limit for filing a petition is jurisdictional.

The Supreme Court in Boechler rejected the Government’s argument that §6330(d) was jurisdictional because it was analogous to §6213(a).  Based on this, Hallmark Research argued that, like §6330(d), §6213(a) was not jurisdictional.  The Tax Court viewed the Supreme Court’s comments as a statement that each statute has to be analyzed in the light of its own text, context and history.  The Tax Court concluded:

Section 6213(a) clearly states that its 90-day deadline is jurisdictional, as indicated by its text, context, and uniform treatment during its long history. Congress has limited the Tax Court’s deficiency jurisdiction to only those cases in which a petition is timely filed, and we do not have authority to extend the deadline in section 6213(a) by equitable tolling. Late-filed deficiency petitions must therefore be dismissed for lack of jurisdiction.

Appended to the Tax Court’s opinion was a chronological listing of enactments, amendments and codifications of statutes creating deficiency procedures, intervening judicial decisions, and select legislative history.

The Hallmark Research case is appealable to the Ninth Circuit, which in Organic Cannabis Foundation, LLC v. Commissioner, 962 F.3d 1082 (2020), held that the 90-day time limit of § 6213(a) is jurisdictional.  I therefore assume that if Hallmark Research appeals, the Ninth Circuit will affirm the Tax Court.  It will probably take several years for there to be a conflict among the circuits on this issue, assuming any circuit holds that §6213(a) is not jurisdictional.  The Tax Court’s opinion is the best exposition of the case for the jurisdictional nature of the time-limit for filing a petition.  Whether any court of appeals will disagree remains to be seen.  For the foreseeable future, however, taxpayers and their representatives will have to do everything possible to ensure that petitions are filed within the requisite time period.

Robert S. Horwitz is a Principal at Hochman Salkin Toscher Perez P.C., former Chair of the Executive Committee of the Taxation Section, California Lawyers’ Association, a Fellow of the American College of Tax Counsel, a former Assistant United States Attorney and a former Trial Attorney, United States Department of Justice Tax Division.  He represents clients throughout the United States and elsewhere involving federal and state administrative civil tax disputes and tax litigation as well as defending clients in criminal tax investigations and prosecutions. In 2022 the Tax Section of the California Lawyers Association awarded him the Joanne M. Garvey Award for lifetime achievement in and contributions to the field of tax law. Additional information is available at http://www.taxlitigator.com.

Posted by: Steven Toscher | November 25, 2022

Edward Robbins, Jr. Quoted in Tax Notes

Ed Robbins quoted in Tax Notes concerning Fahry v Commissioner where petitioner is asserting the Internal Revenue Service does not have assessment authority under the Code for many international penalties. While it sounds like a tax protestor argument, this position has some real statutory legs or shall I say a real lack of statutory legs.

Stay tuned.

Click Here for Article.

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