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Individual Tax

Filing period for whistleblower award appeal to Tax Court not jurisdictional

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

The Court of Appeals for the District of Columbia Circuit has reversed and remanded the Tax Court's dismissal of an individual's petition to review the IRS's denial of his whistleblower award claim.

Although the Tax Court properly determined that the individual’s petition was untimely, the filing period is not jurisdictional and is subject to equitable tolling.

Background.  The IRS is authorized to pay awards to individuals who help the IRS (1) detect underpayments of tax or (2) detect and bring to trial and punishment persons guilty of violating the internal revenue laws. (Code Sec. 7623(a)) An award under Code Sec. 7623(a) may be paid only if information provided by the individual to the IRS results in the collection of additional tax, penalties, interest or other proceeds, in a settlement, administrative or judicial action. (Code Sec. 7623(b)(1))

Observation: Awards under Code Sec. 7623 are commonly known as whistleblower awards.

An individual may appeal an IRS whistleblower award determination to the Tax Court within 30 days of such determination. (Code Sec. 7623(b)(4)) The individual may then appeal the Tax Court’s decision to the applicable Circuit Court of Appeals. (Code Sec. 7482(a))

According to the U.S. Supreme Court, most time bars are nonjurisdictional; they are claim-processing rules that seek to promote the orderly progress of litigation, but do not deprive a court of authority to hear a case. A time bar is only jurisdictional when Congress has clearly stated as much. (Kwai Fun Wong(S Ct 2015) 135 S Ct 1625) The clear statement requirement is only satisfied when the statute expressly refers to subject-matter jurisdiction or speaks in jurisdictional terms. (Musacchio(S Ct 2016) 136 S Ct 709)

The Tax Court has held that the filing period in Code Sec. 7623(b)(4) is jurisdictional and has dismissed late-filed petitions to review the denial of a whistleblower award for lack of jurisdiction. (Kasper, (2011) 137 TC 37)

A rebuttable presumption of equitable tolling applies in suits against the government when the filing period is not jurisdictional. (Irwin v. Dept of Veterans Affairs, (S Ct 1990) 498 US 89) Equitable tolling stops the statute of limitation from running when a claimant has actively pursued judicial remedies or when the claimant has been induced or tricked by his adversary’s misconduct into allowing the filing deadline to pass. (Irwin)

Facts. In 2009, David Myers filed a Form 211, Application for Award of Original Information, with the IRS. In his application, Myers alleged that his former employer had intentionally misclassified him and other employees as independent contractors and sought a whistleblower award.

On March 13, 2013, the IRS denied Myers’ claim. Myers responded to the denial letter and continued corresponding with the IRS about his claim, including an email to IRS Chief Counsel on April 11, 2014, which protested the IRS’s denial of his whistleblower award claim.

On January 20, 2015, Myers mailed to the Tax Court his pro se petition asking the court to review the IRS’s denial of his whistleblower award claim. In response, the IRS moved to dismiss his petition because it was untimely under Code Sec. 7623(b)(4).

Tax Court’s decision.  In the Tax Court, Myers argued that the time for filing his petition for review never began to run because the IRS could not prove it sent him a final determination letter denying his whistleblower claim.However, the Tax Court concluded that whether the IRS properly mailed a determination letter to Myers was irrelevant because he had actual notice of the IRS’s decision to deny his whistleblower award claim no later than April 11, 2014, and he didn’t file his petition for review of that decision until January 20, 2015. Therefore, the Tax Court dismissed his petition to review for lack of jurisdiction.  (Myers, (2017) 148 TC 438)

DC circuit’s holding.  The Court of Appeals for the District of Columbia Circuit reversed the Tax Court’s decision to dismiss Myer’s untimely petition for review for lack of jurisdiction. The Appeals Court noted that, for a time bar to be jurisdictional, Congress must make a clear statement of its intent to deprive the Tax Court of authority to hear an untimely petition. And, while a single sentence in Code Sec. 7623(b)(4) contains both a requirement to file within 30 days and a grant of jurisdiction, there is nothing in the structure of the sentence that conditions the jurisdictional grant on the limitations period or otherwise links those separate clauses. Therefore, Code Sec. 7623(b)(4)does not contain a clear statement that timely filing is a jurisdictional prerequisite to the Tax Court’s hearing a petition for review of the IRS’s denial of a whistleblower award claim.

In addition, the Appeals Court held that, since timely filing is not a prerequisite to the Tax Court’s jurisdiction, the filing period is subject to equitable tolling. Therefore, the Appeals Court remanded the case for the Tax Court to determine whether Myers was entitled to equitable tolling.

The Appeals Court also noted that it was the first Circuit Court of Appeals to decide whether Code Sec. 7623(b)(4) was jurisdictional in nature. It also recognized that its holding is in some tension with 9th Circuit Court of Appeals’ decision in Duggan, (CA 9 2018) 121 AFTR 2d 2018-436, regarding the similarly worded Code Sec. 6330(d)(1).

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