When a taxpayer contests IRS collection actions in a Collection Due Process (CDP) hearing, the hearing is officially over when the Office of Appeals issues a formal Notice of Determination.  Section 6330(d)(1) gives taxpayers 30 days from the date of that Notice to petition the Tax Court for judicial review of the Office of Appeals decision.

We now know that the doctrine of equitable tolling can extend the 30-day limitation period in §6330 because that timing requirement is not jurisdictional.  Boechler v. Commissioner, 596 U.S. 199 (2022).  The fact that the deadline is non-jurisdiction, however, does not lessen its importance.  It just means that the petition gets dismissed for failure to state a timely claim rather than because the Tax Court lacks jurisdiction to hear the matter.  Nor does the doctrine of equitable tolling give taxpayers much wiggle room to avoid the deadline by pleading “not fair!”  To be “not fair” in the relevant sense, taxpayers must be able to show the right causality: how events beyond their control caused them to miss the deadline.

In Debra Reed and Timothy Reed v. Commissioner, T.C. Memo. 2025-4 (Judge Way) (Jan. 16, 2025), the taxpayers had their identify stolen in 2012.  It caused them no end of grief.  They attempted to use that unfortunate experience to justify filing their Tax Court petition after the petition deadline.  In response Judge Way became Judge “No Way” because the taxpayers were unable to show how the identify theft caused them to miss their CDP petition deadline…by some four years.

Details below the fold.

Taxpayers have multiple opportunities to obtain Tax Court review of various IRS actions.  All of those opportunities require taxpayers to file their petitions with the Tax Court within a certain time frame.  All those timing deadlines are important.  But some are more important than others because they are tied to the Tax Court’s power to hear the subject matter of the petition.  We call those kind of deadlines “jurisdictional.”

Jurisdiction is just a fancy word for power.  Like all other federal courts, the Tax Court has only the power given to it by Congress and if Congress conditions that power on a taxpayer’s timely petition, then the Court cannot use judicially-created equitable doctrines to give itself power.  Equity is just a fancy word for fairness and jurisdiction is all about power, not fairness.

The Tax Court is nonetheless pretty clever at finding work-arounds to jurisdictional deadlines to help taxpayers.  For details, see Bryan Camp Equitable Principles and Jurisdictional Time Periods, Part 2, 159 Tax Notes 1581 (June 11, 2018).  At the same time, the Court has been quite cautious in how it reads petition deadlines.  It favors reading them as jurisdictional unless and until some higher authority says otherwise.  Thus, although it now treats the §6330 petition deadlines as non-jurisdictional, that is because the Supreme Court told it to do so.  In contrast, the Tax Court has rejected the Third Circuit’s view that the §6213 petition deadlines to contest Notice of Deficiency are non-jurisdictional.  Sanders v. Commissioner, 161 T.C. No. 8 (2023) (refusing to follow Culp v. Commissioner, 75 F.4th 196 (3rd Cir. 2023)).

There are two different doctrines that a taxpayer might use to avoid the enforcement of a non-jurisdictional timing provision: equitable estoppel and equitable tolling. Don’t be fooled by the word “equitable” into thinking these are mushy-gushy feel-good-free-for-all doctrines.  They ain’t.  Let’s take a look.

Law:  Equitable Estoppel
Equitable estoppel is incredibly difficult to assert against the government.  A party seeking to equitably estop the government must prove the following: (1) an affirmative act of misconduct by a government employee; (2) that the employee knew all relevant facts at the time of the misconduct; (3) that the employee intended for the conduct to be acted upon; (4) that the party seeking estoppel had no knowledge of the relevant facts and (5) that the party seeking estoppel reasonably relied on the government's conduct and (6) as a result of his reliance, suffered substantial injury.  See e.g. Robertson-Dewar v. Holder, 646 F.3d 226, 229 (5th Cir. 2011) (explaining elements).  The main difficulty is the affirmative misconduct element.  That requires “an affirmative misrepresentation or affirmative concealment of a material fact by the government.”  Linkous v. United States, 142 F.3d 271 (5th Cir. 1998).

The classic case is Federal Crop Ins. Corporation v. Merrill, 332 U.S. 380 (1947).  There, the poor farmer Mr. Merrill, applied for federal insurance for re-seeding his winter wheat crop.  The local agent told him that the re-seeding would be covered.  When his crop was destroyed by drought it turns out that the properly promulgated regulations did not permit insurance for re-seeded crops.  The local agent had not known that.  Nonetheless, the Supreme Court said, in effect, “too bad, so sad.”  What it really said was:

“Whatever the form in which the Government functions, anyone entering into an arrangement with the Government takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority.” Id. at 384.  The majority continued: “Men must turn square corners when they deal with the Government.” Id. at 385.

Merrill was a close 5-4 decision with Justice Jackson, in dissent, penning this memorable line:  “It is very well to say that those who deal with the Government should turn square corners. But there is no reason why the square corners should constitute a one-way street.” Id. at 388.

Over time, the Supreme Court has repeatedly rejected Justice Jackson’s approach and repeatedly reiterated the majority's rationale.  As the Court explained in OPM v. Richmond, 496 U.S. 414 (1990): “we have reversed every finding of estoppel that we have reviewed. Indeed, no less than three of our most recent decisions in this area have been summary reversals of decisions upholding estoppel claims.”

Lower courts, however, have sometimes applied equitable estoppel against the federal government, and in tax cases no less!  In Fredericks v. Commissioner, 126 F.3d 433 (3rd Cir. 1997), the IRS was auditing the taxpayer’s tax shelter activity.  The taxpayer had signed a Form 872-A.  That form waives the assessment statute expiration date (ASED) for an unlimited time (the taxpayer can always send in an 872-T that terminates the waiver).  The IRS office handling his tax shelter examination (Newark) did not have a copy of the 872-A and told the taxpayer it had never received that form, opining that it may have been lost in the mail.  In reality, the Form was sitting in a file in a different IRS office (Manhattan).  Not knowing that, the Newark Revenue Agent (RA) asked Mr. Fredericks to sign just a regular Form 872, which extends the ASED for one year at a time.  The IRS did that three years in a row.  Then someone found the 872-A and sent it to the Newark RA, but no-one told the taxpayer that.  Eight years later the IRS sent the NOD.  The taxpayer petitioned Tax Court, claiming the IRS should be equitably estopped from relying on the 872-A when he had been told it was never received and had been asked to sign three 872's.

The Tax Court refused to apply equitable estoppel, finding that the Neward RA had not made an affirmative mis-representation when telling the taxpayer that they had never received the 872-A.  But the Third Circuit reversed, finding that “the IRS” as a whole made an affirmative misrepresentation.  Sure, the Supreme Court may well have reversed, but the government did not even try.

So equitable estoppel can work, at least sometimes.

Law: Equitable Tolling
Obtaining equitable tolling is also an uphill climb, although not as steep a climb as obtaining equitable estoppel.  That is because, unlike equitable estoppel, equitable tolling requires no affirmative misconduct by the government.  Rather, equitable tolling is appropriate “in those rare instances where—due to circumstances external to the party's own conduct—it would be unconscionable to enforce the limitation period against the party and gross injustice would result.” Whiteside v. United States, 775 F.3d 180, 184 (4th Cir. 2014) (en banc).

Specifically, a party seeking equitable tolling must meet two requirements: (1) they must show they have diligently pursued the rights now barred by the limitation period; and (2) they must show that what prevented timely filing was some extraordinary event, beyond their control. Menominee Indian Tribe of Wisconsin v. U.S., 577 U.S. 250, 255 (2016).

Equitable tolling does not apply to all types of limitation periods.  First, it will not apply to statutes of repose, which are limitation periods that operate to eliminate a right rather than merely restrict access to courts to vindicate a right.  Equitable tolling can be appropriately apply to limitation periods because one main purpose of a limitation periods is to make a party pursue their rights diligently.  If something outside their control prevents that from happening, then applying the limitations period cuts against that purpose.  That is not true for statute of repose. See CTS Corp. v. Waldburger, 573 U.S. 1 (2014)(equitable tolling applies to statutes of limitation but not statutes of repose).

Second, equitable tolling will not apply when the statute of limitation at issue already contains equitable rules for its application.  Remember that equitable tolling is a judicially created doctrine and courts will yield to legislative directives if the statute is clear and tolling would be inconsistent with the relevant statute's text..  See Irwin v. Department of Veterans Affairs, 498 U.S. 89, 96 (1990).

Thus, for example, the federal Quiet Title Act (QTA) permits plaintiffs to file suit against the federal government’s seizure of land within 12 years after they (or their predecessors in interest) “knew or should have known” of the government’s claim. 28 U.S.C. § 2409a(g). The Supreme Court has refused to allow equitable tolling to apply to that statute because the “knew or should have known” language already incorporated an equitable concept. United States v. Beggerly, 524 U.S. 38, 49 (1998) (“It is of special importance that landowners know with certainty what their rights are, and the period during which those rights may be subject to challenge. Equitable tolling of the already generous statute of limitations incorporated in the QTA would throw a cloud of uncertainty over these rights, and we hold that it is incompatible with the Act.”).

In the area of tax, results are mixed on when, if ever, equitable tolling can even apply.  The quintessential example of where equitable tolling does not apply is the §6511 periods for taxpayers to file claims for refunds.  The Supreme Court has said that the detailed complexity of the statutory refund limitation provisions, both as to timing restrictions on claims in §6511(a) and amounts in §6511(b) precludes courts from applying equitable tolling doctrines.  U.S. v. Brockcamp, 519 U.S. 347 (1997).  There, the taxpayer suffered from mental disability throughout the statutory period and asked the courts to apply equitable tolling.  Both the district court and Circuit courts agreed that equitable tolling could apply but disagreed on whether the taxpayer was entitled to it.  The Supreme Court, however, held that the complexity of statutory language and scheme meant equitable tolling was precluded.  Congress later amended §6511 to permit tolling in cases of “financial disability.” See §6511(h).  Later courts have used that to re-affirm the central holding in Brockcamp that courts may not otherwise apply equitable tolling to that statute.

In contrast to §6511, courts have held that equitable tolling does apply to the limitation period in, §6532(c) the limitation period for wrongful levy actions under §7426. Capital Tracing, Inc. v. United States, 63 F.3d 859, 861 (9th Cir. 1995).  And courts are split on whether equitable tolling can apply to rescue late-filed suits brought to quash a third-party summons brought after the limitation period in §7609(b)(2)(A). See Gudenau v. U.S., 2006 WL 2971456 (D. Hi. 2006) (sorry, no free link).

But just because equitable tolling can apply does not mean it’s easy to use.  That's what we learn today from the Tax Court.

Facts
The tax year at issue is 2015.  Mr. and Ms. Reed owed about $1,900 when the IRS started its collection process in 2018.  As usual, the IRS sent the taxpayers a Notice of their right to a Collection Due Process (CDP) hearing and the taxpayers caught that CDP butterfly.  Since there is only a 30 day window to request a CDP hearing, that’s pretty impressive.  See Bryan Camp, Lesson From The Tax Court: The CDP Butterfly, TaxProf Blog (July 6, 2021).

So they got their CDP hearing, by which they were able to delay collection activity until the Office of Appeals issued a Notice of Determination on April 25, 2019, a Thursday.  That meant the Reeds had until Tuesday May 28, 2019 to file their Tax Court petition.  Yes, that is more than 30 days, but since the 30th day fell on Saturday May 25th, and Monday May 27th was Memorial day, that means §7503 extended their due date to the following Tuesday.

The Reeds did not file their Tax Court petition within that time period.  Nope.  They did not file it until June 26, 2023.  That’s waaaaaaaay late.

The IRS filed a motion to dismiss and the Reeds attempted to argue that it would be unfair to kick them out of court.  They thought that equitable estoppel should apply because Ms. Reed’s identity had been stolen and used to generate false refunds.  That had then caused cascading “accounting errors” with the IRS for various tax years.  In their 2018 CDP hearing they showed Appeals a letter from the Department of Justice that verified “that a criminal defendant operated a Stolen Identity Refund Fraud scheme between 2010 and 2015 in which petitioner Deborah Reed’s identity was stolen.”  Op. at 3.

Lesson:  Find The Right Causality
The Reeds showed Appeals that DOJ letter in their 2018 CDP hearing and Appeals attempted to see whether the liability at issue (the 2015) liability was one of those accounting errors.  As Judge Way notes, “Appeals was unable to make a determination regarding an identify theft issue for the taxable year of 2015.”  Op. at 2 (emphasis added).  In fact, the various W-2’s for that year matched the returns the IRS had processed.  And the taxpayers gave no evidence that the identity theft had affected the accuracy of the liabilities sought to be collected.  Id.

Worse, the taxpayers could not explain to Judge Way why the identify theft affected their ability to petition Tax Court timely.  Judge Way noted the causality problem: while the identify theft no doubt caused problems with IRS interactions in various ways, the Reeds were unable to explain how events that happened before the CDP hearing affected their ability to pursue Tax Court review of the CDP hearing.  Wrote Judge Way:  “…the identity theft occurred in 2012, the DOJ notified petitioners in 2016, and Appeals considered and verified the identity theft in its CDP hearing in 2018 before issuing a Notice of Determination in 2019. Thus, the critical facts which might provide a basis for tolling the limitations period occurred many years before respondent issued the Notice of Determination.”

Bottom Line: To get equitable tolling, you must show the right causality.  You must show how events beyond your control did more than cause you pain and grief; you must show how they made you miss the deadline. 

Comment: While not noted by Judge Way, another reason to be very skeptical about applying equitable tolling here is that these were the same taxpayers who had been able to act speedy quick to get a CDP hearing in the first place!  And that was also at a time where the prior identity theft would have been as much an obstacle as after the CDP hearing.

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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