Section 6213 generally gives taxpayers 90 days after the IRS mails them a Notice of Deficiency (NOD) to petition the Tax Court for review. That’s the 90-day rule. But some lucky taxpayers get 150 days instead of the usual 90. That’s the 150-day rule. Who are those lucky taxpayers? Well, the statute says the 150-day rule applies “if the notice is addressed to a person outside the United States.” The Tax Court has interpreted that phrase to mean that taxpayers get the 150-day rule when they are outside on foreign travel when the IRS mails the NOD, or maybe when the Post Office delivers the NOD. Hmmmm … it's hard to say exactly because there is no bright line here. Case law varies. Not everyone who is outside the United States on one of those two days automatically gets the 150 period. It just depends on whether the Tax Court believes that the travel interfered with the taxpayer’s ability to meet the 90 day deadline. That’s partly what makes these taxpayers lucky.
Today we learn that a taxpayer who is in the country on both the day of mailing and the day of delivery will probably not be lucky. Later travel outside the country will not trigger the 150 day deadline. That’s one takeaway from Rosa M. Marcano v. Commissioner, T.C. Summ. Op. 2024-26 (Dec. 23, 2024) (Judge Abeit). There, the taxpayer was in the country when the NOD was mailed and delivered. But she then traveled outside the country for approximately 50 days and did not file her Tax Court petition until 107 days after the IRS mailed the NOD. The Tax Court, however, did not give allow her the 150-day rule because, it said, “the crucial inquiry” (Op. p. 3) was the taxpayer’s location on two crucial dates: the date the IRS mailed the NOD and the date the Post Office delivered it. Here, the taxpayer was in the country on both those particular days. Unlucky!
It seems to me this is not the only lesson here. Despite the language in Judge Arbeit's well-written opinion, I would resist reading this case as creating a bright-line rule. Reading it that way makes it difficult to square with its past approaches. Detail below the fold.
Law: What Triggers the 150 Period?
Section 6213 provides:
“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.”
The history of the Tax Court’s interpretation of this statute is a history of avoiding a bright-line rule.
The 150-day rule originated in §456 of the Revenue Act of 1942, 56 Stat. 798, 953 (sorry, I cannot find a free link). It was originally just applied to gift tax disputes (where a donor would owe gift tax) but was soon incorporated into what is now §6213. Here’s how the Senate Finance Committee explained its purpose:
“In the case of a donor in remote places, such as Hawaii or Alaska, this [90-day] time limit may possibly work a hardship due to delays in transporting mail which may occur during the present hostilities. To correct this hardship section 1012(a) (1) of the Code has been amended to increase the period to 150 days if the notice is mailed to a donor outside the States of the Union and the District of Columbia. This extension applies only to deficiency notices mailed after the date of enactment of the Act” See S. Rept. 1631, 77th Cong., 2d Sess. (1942), as reprinted in 1942-2 C.B. 504, 683. (Again I’m sorry I don’t have a free link, but you can find the Cumulative Bulletins in Hein Online).
Remember, in 1942, neither Hawaii nor Alaska were “States of the Union.”
Even at the start, the Tax Court gave the phrase “addressed to a person outside the United States” a generous interpretation. In Hamilton v. Commissioner, 13 T.C. 747 (1949) the IRS had mailed the NOD to the taxpayer’s last known address, in New York City. But the taxpayer had been living in Paris for the three years before, even though she had filed returns listing the New York address. She filed her petition 149 days after the day the IRS mailed the NOD.
The government focused on the word “addressed” in its argument. It urged the Court to find that taxpayers only got the 150-day rule if the NOD was addressed to a location outside the United States. All other NODs would trigger the 90 day period. Since the NOD here was addressed to a location within the United States and, further, that location was the proper last known address of the taxpayer, the 90 day period applied. Notice this would be a bright-line rule: what was the address on the NOD?
The taxpayer focused on the phrase “person outside the United States.” Thus any NOD mailed at a time when a taxpayer was abroad on the date the IRS mailed the NOD would trigger the 150 day period. Notice this would also be a pretty bright-line rule: where was the taxpayer on the day the IRS mailed the NOD?
The Tax Court rejected both proposed bright-line rules and instead adopted a facts-and-circumstances test. The Court explained that the purpose of the 150 period was to protect those taxpayers who were outside the United States “on some settled business and residential basis, and not on a temporary basis.” Id. at 753. The Tax Court therefore believed it important to examine the facts. On the one hand, if the taxpayer was out of the country on some settled business, then the 150 day period would apply, even if the taxpayer happened to be physically within the U.S. on the date the IRS mailed the NOD. On the other hand, if the taxpayer was physically outside the U.S. on the relevant date “because of a recreational or short business trip,” the that taxpayer would have only 90 days.
The Tax Court was quickly criticized for its holding by other courts. For example in Mindell v. Commissioner, 200 F.2d 38 (2nd Cir. 1952), the taxpayer had been indicted for tax evasion. The NOD was sent to his New Jersey home. But he was not there. Having been released on bail, the taxpayer and his family had skedaddled to Mexico. The taxpayer (not lacking chutzpah) petitioned the Tax Court after 90 days but within 150 days. The Tax Court said “too late!” But the 2nd Circuit reversed, criticizing the Tax Court’s interpretation:
“[W]e cannot agree…that the statute grants the 150 day period only to persons outside the designated area "on some settled business and residential basis, and not on a temporary basis.”
The Court went on, with admirable understatement:
“But even on the Tax Court's theory that the taxpayer must show that he was "regularly residing" abroad, we fail to see why his affidavit was insufficient to establish that fact. Evidence that he had been indicted and jumped bail, if relevant at all, would seem to support his claim of residence in Mexico, since it might raise an inference that his motive in going there was such as to make it unlikely that he would return to the United States in the near future.”
In reaction to Mindell and other cases, the Tax Court later loosened its position to allow even short trips to trigger the 150 day period, but only when the taxpayer was physically out of the country on the day the NOD was mailed. Estate of Krueger v. Commissioner, 33 T.C. 667 (1960). Still later, the Tax Court loosened up its position even more to also allow the 150 day period even when the taxpayer was not outside the United States when the NOD was mailed, if their U.S. presence was just “ephemeral” and they were back outside the U.S. when the NOD was delivered. Lewy v. Commissioner, 68 T.C. 779 (1977).
In all of these cases the Court focused on whether the NOD gave sufficient notice to the taxpayer to make the 90-day rule the appropriate rule. The Court has repeatedly emphasized that “in determining whether we have jurisdiction over a given matter, this Court and The Courts of Appeals have given our jurisdictional provisions a broad, practical construction rather than a narrow, technical one.” Weiss v. Commissioner, 147 T.C. 179, 191 (2016). And why does the Tax Court do that? Why, to “allow[] taxpayers the greatest opportunity, consistently with the statutory language, to obtain jurisdiction in our Court.” Bongam v. Commissioner, 146 T.C. 52, 59 (2016).
The Court certainly feels able to extend the 90 days (up to the statutorily permitted 150 days) when it believes the facts warrant the extension. In some sense, this looks a lot like an equitable determination. Do the facts warrant giving the taxpayer the 150-day rule or should the taxpayer be bound to the 90-day rule? It depends… The Court’s exercise in picking and choosing the jurisdictional facts certainly seems like an exercise in equity. Both I and Professor Keith Fogg have discussed this in past posts. See e.g. Keith Fogg, Tax Court: 150-Day Rule Requires Hardship, Procedurally Taxing Blog (Sept. 23, 2023) (this link may be behind a paywall).
Thus, on the one hand, the Tax Court has refused to allow the 150 day period for a taxpayer who was physically “outside the United States” on the day the NOD was mailed but was back two days later, in time to receive it. Malekzad v. Commissioner, 76 T.C. 963 (1981).
Similarly, the 150-day rule did not apply in Roberts v. Commissioner, T.C. Memo. 1998-301. There, the taxpayer received the NOD and on the same day, read it and sent it to his accountant to prepare a petition. The taxpayer then left the country the very next day and did not return until after the 90 days had run, only to discover no petition had been filed. Unlucky. The Tax Court emphasized that while away on travel, the taxpayer “periodically talked with his wife and persons in his office…however, he did not have any conversations relating to the notice of deficiency or the need to file a petition.” It basically found that because the taxpayer actually received and dealt with the NOD the day before he left the country, the taxpayer’s inattention to the NOD after that was just neglect. “Such neglect by petitioners and their tax adviser is not a basis to invoke the 150–day rule.”
On the other hand, when the taxpayers left the U.S. on the same day the IRS mailed the NOD, taking a 5-day trip to Jamaica, the Tax Court decided that absence was enough to trigger the 150 day period because they “were delayed at least 4 days in receiving the notice of deficiency.” On these facts the Court held it had jurisdiction over a petition filed on the 99th day. Levy v. Commissioner, 76 T.C. 228 (1981). The Court may have as well decided otherwise. After all, It a 4-day absence from the date of mailing is more like a 1-2 day absence from date of delivery. Still, the taxpayers got lucky in the timing of their trip to Jamaica.
In today’s case, the taxpayer was not lucky. Let’s see why.
Facts
Ms. Marcano lives in California. The IRS mailed the NOD to her last known address on October 2, 2023. It was delivered October 5th. Under the 90-day rule, her deadline for filing a Tax Court petition was January 2, 2023 (the 90th day fell on Sunday December 31st and so was extended until January 2nd by operation of §7503). It is not clear from the opinion whether she was, in fact, home or whether she, in fact, knew the NOD had been delivered. Judge Arbeit says only that she “does not dispute she was in the country when the notice was delivered.” Op. at 2.
While the opinion is silent on where “in the country” Ms. Marcano was on dates of mailing and delivery, it does tell us the dates she was out of the country. They were not October 2nd or October 5th. She traveled to Cabo San Lucas, Mexico from October 23 to 30, 2023 (7 days), and she traveled to Bogota, Columbia from December 15, 2023, to January 28, 2024 (44 days). So, by my count, Ms. Marcano was outside the United States for 51 days, 25 of which were during the 90-day period (7 days in October plus the 18 days between December 15th and the deadline date of January 2th).
Ms. Marcano’s representative, an Enrolled Agent (Mr. Edward J. Sutton), filed her petition on January 14, 2024, in the middle of her trip to Bogota. Although not entirely clear in the opinion, footnote 2 notes that the NOD had been delivered to Ms. Marcano “in care of” Mr. Sutton which suggests it had not been sent directly to Ms. Marcano at her home but had been sent to her return preparer's office.
Lesson: To Count the Days, Know The Days That Count
One way to read today’s lesson is that it establishes a bright-line rule: only two days count in determining whether a taxpayer gets the 150-day rule or is stuck with the 90-day rule: the day the IRS mails the NOD and the day the Post Office delivers it. If the taxpayer is outside the country on either of those days, then that triggers the 150-day period.
You can read this passage as creating a bright-line test:
“In determining whether the 150-day period applies, we consider both the date of mailing and the date of receipt of the notice of deficiency: the crucial inquiry is whether a taxpayer falls into the category of persons that Congress intended to benefit from a longer filing period. Congress enacted the 150-day rule to prevent hardship caused by a taxpayer’s absence from the United States and the consequent risk of delays in receiving mail.” Op. at 3 (citations omitted).
Applying that lesson to Ms. Marcano, she is stuck with the 90-day rule because she was in the country on both of the days that count. It did not matter to Judge Arbeit whether or not she actually received the NOD before she left the country. He points out that she was in the United States both when the NOD was mailed, when it was delivered and “for almost three weeks thereafter.” Op. at 4.
However, another way to read the opinion is that it continues the facts-and-circumstances tradition that I believe the case law and history establish. Under that approach, the “crucial inquiry" is still whether the taxpayer falls into “the category of persons Congress intended” to get the 150-day rule, but the answer is an exercise of weighing and balancing the facts as part of giving the statute a “broad, practical construction” (Weiss) that will allow taxpayers “the greatest opportunity, consistent[] with the statutory language, to obtain jurisdiction in our Court.” (Bognam). It is not an exercise in just seeing where the taxpayer was on either one of two days.
I think this is the better reading of the case no matter Judge Arbeit’s attempt to portray it as a bright-line legal exercise. Ms. Marcano here is very much like the taxpayer in Roberts. Her travel outside the U.S. did not adversely affect her ability to meet the 90-day deadline, either in theory or practice. In theory, the important fact is that she had three weeks after Mr. Sutton received the NOD to act on it. Judge Arbeit is careful to tell us that. In practice, the important fact is that Mr. Sutton certainly was able to file the petition while she was away as Judge Arbeit is also careful to tell us. It's just that Mr. Sutton neglected to do so by the 90th day. Thus, much like Mr. Roberts, “such neglect by petitioner[] and [her] tax adviser is not a basis to invoke the 150–day rule.”
Comment: Knowledge Is The Key
Times have changed since the 1942 enactment of the 150-day rule. I had to laugh when I read the Senate Finance Committee report that referenced Hawaii and Alaska as locations outside the United States! And the barriers that made communications with such remote places a hardship have greatly diminished. This is a point I made in Lesson From The Tax Court: The Boundary Waters of Equity, TaxProf Blog (Sept. 11, 2023).
To the extent the Tax Court continues its facts-and-circumstances approach, that approach allows it to keep the archaic language in the Tax Court current with the times. When I look at the history of the legislation, and the case law, it seems to me the key fact is when did the taxpayer have reason to know about the NOD? That is, the question is whether a taxpayer had reasonable ability to learn of the NOD’s delivery. What I take from today’s case is that the taxpayer’s travel away from home after learning of the NOD is not by itself a reason to give the taxpayer 150 days instead of 90 to file their petition … unless, of course, that travel was involuntary and prevented the taxpayer from acting on the NOD. But NOW we’re getting into equitable tolling territory, which is beyond the scope of today’s article.
Bryan Camp is the George H. Mahon Professor of Law at Texas Tech University School of Law. He invites readers to return on the first Monday of each month (or Tuesday if Monday is a federal holiday) to TaxProf Blog for another Lesson From The Tax Court.
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