90-day Deadline for Filing Petition to Redetermine Employment Tax Status Not Jurisdictional

The Tax Court has determined that the 90-day deadline for filing a petition for redetermination of employment status is not jurisdictional. (Belagio Fine Jewelry, Inc., 162 TC No. 11 (6/25/2024))

Facts.

After the taxpayer failed to file quarterly employment tax returns for 2016 and 2017, the IRS issued a determination to the taxpayer finding that the business had at least one employee during those years. The determination notice advised the taxpayer they had 90 days file a Tax Court petition objecting to the determination.

Four days before the 90-day period expired, the taxpayer mailed their petition to the Tax Court using a private delivery service that was not recognized by the IRS as a designated private delivery service for purposes of the mailbox rule. The taxpayer’s petition arrived at the Court on day 91.

The IRS filed a motion to dismiss the petition for lack of jurisdiction, alleging that the 90-day period to petition the Court for redetermination of employment status is jurisdictional and, therefore, the taxpayer’s failure to file within that period deprived the Court of jurisdiction.

The taxpayer objected to the motion on the ground that the deadline is a non-jurisdictional claim processing rule subject to equitable tolling.

90-day filing period not jurisdictional.

The Tax Court denied the IRS’ motion to dismiss. After considering the relevant text, statutory context, and history of Code Sec. 7436(b)(2), the Tax Court determined that Congress did not clearly state that the 90-day deadline to file a petition for redetermination of an employment tax determination is a jurisdictional requirement.

The Tax Court noted that the 90-day deadline in Code Sec. 7436(b)(2) applies only when the IRS (1) sends a notice of employment tax determination to the taxpayer, and (2) sends the notice via certified or registered mail. In cases where the IRS either fails to send a notice or fails to send the notice through certified or registered mail, the 90-day deadline is inapplicable.

Moreover, as the Court previously held, its jurisdiction comes from “the determination, not the piece of paper.” A taxpayer that hasn’t received a notice of employment tax determination needs to show that the IRS “made a determination” regarding employment status to invoke the Court’s jurisdiction.

Because it is the IRS’ choice of communication that requires or exempts a taxpayer from the 90-day deadline, it struck the Court as “at least unusual to ascribe jurisdictional significance to a condition subject to this sort of exception.”

The Tax Court found that Code Sec. 7436 as well as similarly worded statutes lack a long line of Supreme Court cases interpreting their deadlines as jurisdictional. In addition, the Court found that the prior-construction canon was inapplicable because Code Sec. 7436 was amended before the Court decided that the 90-day deadline was jurisdictional. As a result, the relevant historical treatment of Code Sec. 7436 didn’t demonstrate that Congress clearly intended the 90-day deadline to be jurisdictional.

The Tax Court didn’t address the issue of equitable tolling.

For more information about employment status determination, see Payroll Guide ¶2300.