Rules
- Winston: Two rules that cannot be broken, Jonathan. No blood on Continental grounds, and every marker must be honored. Now, while my judgment comes in the form of excommunicado, the High Table demand a more severe outcome if their traditions are refused.
- John Wick: I have no choice?
- Winston: You dishonor the marker, you die. You kill the holder of the marker, you die. You run, you die. This is what you agreed to, Jonathan. Do what the man asks. Be free. Then, if you want to go after him, . . . be my guest. But until then . . .
- John Wick: Rules.
- Winston: Exactly. Rules. Without them, we’d live with the animals.[i]
In the fictional world of John Wicks, the High Table enforces a strict code of conduct[ii] without which the lives of its inhabitants would mimic life in a Hobbesian state of nature.[iii]
However, as dangerous and as rule-bound as life “under the Table” appears to be, it pales in comparison, both in terms of numbers and complexity, to the rules that have been promulgated for the administration of the U.S. federal system.
Federal Taxes
Just think on it. During FY 2024, the IRS collected approximately $5.1 trillion in gross revenues, generating about 96 percent of the funding that supports the federal government’s operations. The agency processed more than 266 million tax returns, including 161 million individual income tax returns.
The IRS’s efforts do not occur in a vacuum – the agency interacts with millions of taxpayers and thousands of tax professionals every year.[iv]
The agency also interacts with the federal courts,[v] including the U.S. Tax Court[vi] and its 19 Judges.[vii] The Tax Court receives over 20,000 petitions, and closes over 30,000 cases, every year. Most of these tax disputes are settled without a trial. That said, the Tax Court still adjudicates almost all federal tax-related litigation.[viii]
Why is the Tax Court the preferred forum for taxpayers who want to contest the proposed imposition of additional tax by the IRS? Because a taxpayer can bring suit in the Tax Court without having to first pay the asserted deficiency.[ix] It’s also because the Judges are tax specialists.
So, how do all these stakeholders in the federal tax system work together in any effective or meaningful way?
Rules, starting with the IRS.
Tax Collection
The IRS is charged with enforcing the U.S. federal tax laws. In general, it is responsible for processing tax returns and for collecting taxes.
As part of its collection function, the agency may review or examine a taxpayer’s books, accounts, financial and other records to ensure that the information reported on the taxpayer’s return is reported correctly, according to the Code,[x] and to verify that the reported amount of tax is correct.
Where a taxpayer has failed to pay the amount of tax reported as owing on their tax return,[xi] or where the IRS has determined that a taxpayer failed to comply with the filing, reporting and payment requirements imposed by the Code, the agency will seek to collect the taxes that have been reported but not paid and to secure tax returns that have not been filed.[xii]
If the IRS determines that a taxpayer has not reported the correct amount of tax – for example, because the taxpayer’s return was somehow deficient[xiii] – the IRS will propose changes to the taxpayer’s return and will calculate what it has determined is the “correct” amount of tax owing based upon such changes.
If a taxpayer disagrees with the IRS’s determination, or with any part thereof, they may request a conference with the examiner’s manager to go over the examiner’s findings, and perhaps to highlight facts and/or arguments the taxpayer believes the examiner did not fully appreciate or may have missed.
Throughout the foregoing process, the IRS is aware that it has only three years from when a taxpayer’s return was due or filed (whichever is later) to formally record a taxpayer’s liability as owing – i.e., to assess the tax – following which it may seek to collect the amount thereof.
If there is enough time remaining on the statute of limitations for assessment of additional tax, the taxpayer may have the opportunity to present its case to the IRS Independent Office of Appeals. The taxpayer will receive a letter that offers the right to appeal the proposed changes. In general, the taxpayer must submit a formal written protest within 30 days from the date of the letter.[xiv]
However, if the IRS determines that there is not enough time remaining on the statute of limitations, the agency will request that the taxpayer agree to an extension period[xv] no longer than is necessary to properly complete the examination and any administrative action necessary to process the taxpayer’s case.[xvi]
If a taxpayer refuses to agree to an extension, the IRS will take steps to assess any tax it has determined to be due, beginning with the issuance of a formal “notice of deficiency” (or “90-day letter”).[xvii] This notice does not require that the taxpayer make an immediate payment. Instead, the notice describes the basis for the IRS’s determination that an additional amount of tax is due.[xviii] It also gives the taxpayer 90 days to either agree to the asserted deficiency or file a petition with the Tax Court for a redetermination of the proposed deficiency.[xix]
Until recently, it was almost universally understood that once the notice of deficiency is issued, the 90-day period cannot be suspended or extended. If a taxpayer misses the deadline for filing their petition with the Tax Court, the latter does not have jurisdiction to hear the taxpayer’s case. In other words, the 90-day rule has been treated as jurisdictional.
As of last month, however, the Second, Third and Sixth Circuit Courts of Appeals have decided that the Tax Court may consider an extension of the 90-day period for petitioning the Court under the doctrine of equitable tolling, while the Seventh and Ninth Circuits, as well as the Tax Court itself, have rejected that position.
What follows is a brief discussion of the Second Circuit’s decision, which was rendered last month.[xx]
The Second Circuit
The IRS sent a timely[xxi] notice of deficiency to Taxpayer regarding their 2018 income-tax returns. As indicated earlier, a petition to the Tax Court challenging a notice of deficiency must be filed within 90 days from the date the notice was issued.[xxii] As it turned out, Taxpayer’s counsel missed that deadline and filed the petition nine days late.
Shortly thereafter, the IRS filed a motion in the Tax Court to dismiss Taxpayer’s petition for lack of jurisdiction because the petition was not filed timely. Taxpayer opposed that motion, arguing that the 90-day filing requirement is non-jurisdictional and subject to equitable tolling.
The Tax Court found that the IRS properly mailed the notice of deficiency to Taxpayer and that Taxpayer failed to file their petition within the prescribed 90-day window. The Tax Court, therefore, concluded that it lacked jurisdiction and dismissed the petition.
Taxpayer timely appealed to the Second Circuit.
Taxpayer first argued that the above-referenced statutory 90-day filing deadline is a non-jurisdictional, claim-processing rule, which states, in relevant part:
“Within 90 days…, after the notice of deficiency . . . 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 Court began by acknowledging it had “long described” the 90-day filing rule “as jurisdictional in nature.” However, it went on to explain that,
“[i]n recent years, . . . the Supreme Court has sought to ‘bring some discipline’ to the use of the word ‘jurisdiction,’ observing that judicial opinions have often stated that the court was dismissing the case for lack of jurisdiction without explicitly considering whether the procedural rule actually ‘govern[ed] [the] court’s adjudicatory capacity.’ . . . The Court has noted that such imprecision can have significant consequences for both litigants and courts.”
According to the Supreme Court, if a court’s authority to hear a case is conditioned on the satisfaction of a particular step, then compliance with that step is jurisdictional. Such a requirement, the Supreme Court has explained, “cannot be waived or forfeited,” and it does “not allow for equitable exceptions.”[xxiii]
However, the Supreme Court has also stated that, “we treat a procedural requirement as jurisdictional only if Congress ‘clearly states’ that it is.”[xxiv]
Considering the Supreme Court’s decisions from which the above statements were drawn, the Second Circuit framed the question before it as whether the 90-day period for a filing petition with the Tax Court is jurisdictional.[xxv]
The Second Circuit explained that the jurisdictional nature of a procedural requirement “must . . . be clear; it is insufficient that a jurisdictional reading is ‘plausible,’ or even ‘better,’ than any non-jurisdictional alternatives.” It then noted the Supreme Court has observed that “most time bars are non-jurisdictional” claim-processing rules that “seek to promote the orderly progress of litigation, but do not deprive a court of authority to hear a case.”
Immediately following the foregoing statement, the Circuit Court concluded that, “[b]ecause Congress has not clearly imbued the filing deadline . . . with jurisdictional consequences, we hold that it is a non-jurisdictional, claim-processing rule.”
In support of this “conclusion,” the Court added that the 90-day filing rule “speaks only to a claim’s timeliness, not to a court’s power.” In fact, the Court continued, the language used in the rule simply states that “the taxpayer may file a petition.” According to the Circuit, the Supreme Court has held that similarly permissive language “does not speak in jurisdictional terms.”
The Court pointed out that the rule is directed at the taxpayer, rather than the court, which, according to the Court, indicates that the filing deadline “do[es] not speak to a court’s authority or refer in any way to the jurisdiction of the. . . courts,” but rather “speak[s] to a party’s procedural obligations.”
In addition, there is no “clear tie,” the Court stated, between the Code’s jurisdictional provisions and the rule’s filing deadline, implying that the separation of a filing deadline from a jurisdictional grant indicates that the time bar is not jurisdictional. The Court observed that the word “jurisdiction” does not even appear in the relevant sentence. And unlike other provisions of the Code, which “expressly condition[s] the Tax Court’s jurisdiction on the timely filing of a petition,” the rule’s filing deadline contains no express link to the Tax Court’s jurisdiction.
It also bears noting, the Court stated, that Congress has amended many times over many years the provision that contains the 90-day rule yet “declined . . . to say anything specific about whether the [filing deadline] imposes a jurisdictional bar.”
The Circuit Court then addressed and dismissed the IRS’s arguments that the 90-day rule was jurisdictional. The Court began its rejection of the IRS’s position as follows:
“Recognizing that [the 90-day rule’s] ‘bare text speaks to jurisdiction implicitly’ at best, the Commissioner falls back on a number of other arguments, none of which is availing.”
The Circuit acknowledged that a later sentence in the provision that contains the 90-day rule states that “[t]he 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.”
In response, however, the Court stated that a requirement “does not become jurisdictional simply because it is placed in a section of a statute that also contains jurisdictional provisions.” The Court then added that the clear statement of jurisdiction with respect to injunctive relief “highlights the lack of such clarity” earlier in the statutory provision.
The Court turned next to the IRS’s emphasis on the fact that “[b]efore 2023, every federal appellate court to reach the question had held that [the 90-day rule’s] deadline is jurisdictional.”
“While it is true,” the Court began, “that a requirement may be treated as ‘jurisdictional when a long line of Supreme Court decisions left undisturbed by Congress attached a jurisdictional label to the prescription,’” it pointed out that “no such line of Supreme Court decisions exists here.” Moreover, it continued, “[a] handful of lower court opinions [cannot] stand in for a ruling of [the Supreme] Court, especially where some of th[o]se decisions contain only fleeting references to jurisdiction.”
“Assessment” of the Decision
I’m not buying it.
Let’s begin with the Second Circuit’s statement that, “[b]ecause Congress has not clearly imbued the filing deadline . . . with jurisdictional consequences, we hold that it is a non-jurisdictional, claim-processing rule.”
Is this statement accurate?
The Internal Revenue Service Restructuring and Reform Act of 1998[xxvi] “was designed to transform the IRS into a modern financial institution that was taxpayer-focused, resulting in the largest overhaul of the agency since the 1950s. The legislation revised the IRS mission, organizational structure, and business focus to replace the culture of “enforcement first” with a customer-oriented one, introducing innovations and new management practices.”[xxvii] The legislation included the following provision:
“SEC. 3463. NOTICE OF DEFICIENCY TO SPECIFY DEADLINES FOR FILING TAX COURT PETITION.
(a) In General.–The Secretary of the Treasury or the Secretary’s delegate shall include on each notice of deficiency under section 6212 of the Internal Revenue Code of 1986 the date determined by such Secretary (or delegate) as the last day on which the taxpayer may file a petition with the Tax Court.
(b) Later Filing Deadlines Specified on Notice of Deficiency To Be Binding.–Subsection (a) of section 6213 (relating to restrictions applicable to deficiencies; petition to Tax Court) is amended by adding at the end the following new sentence: “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.”.
(c) Effective Date.–Subsection (a) and the amendment made by subsection (b) shall apply to notices mailed after December 31, 1998.”
The House Report that introduced the bill[xxviii] that would later be enacted, as written above, explained as follows:
“Present Law
Taxpayers must file a petition with the Tax Court within 90 days after the deficiency notice is mailed (150 days if the person is outside the United States) (sec. 6213). If the petition is not filed within that time period, the Tax Court does not have jurisdiction to consider the petition.
Reasons for Change
The Committee believes that taxpayers should receive assistance in determining the time period within which they must file a petition in the Tax Court and that taxpayers should be able to rely on the computation of that period by the IRS.
Explanation of Provision
The bill requires that the IRS include on each deficiency notice the date determined by the IRS as the last day on which the taxpayer may file a petition with the Tax Court. It is expected that the last day on which a taxpayer who is outside the United States may file a petition with the Tax Court will be shown as an alternative. The bill provides that a petition filed with the Tax Court by this date shall be treated as timely filed.”
The Senate Report[xxix] was almost identical:
“Present Law
Taxpayers must file a petition with the Tax Court within 90 days after the deficiency notice is mailed (150 days if the person is outside the United States) (sec. 6213). If the petition is not filed within that time period, the Tax Court does not have jurisdiction to consider the petition.
Reasons for Change
The Committee believes that taxpayers should receive assistance in determining the time period within which they must file a petition in the Tax Court and that taxpayers should be able to rely on the computation of that period by the IRS.
Explanation of Provision
The provision requires the IRS to include on each deficiency notice the date determined by the IRS as the last day on which the taxpayer may file a petition with the Tax Court. The provision provides that a petition filed with the Tax Court by this date is treated as timely filed. Effective Date The provision applies to notices mailed after December 31, 1998.”
Likewise, the Conference Committee Report:[xxx]
“Present Law
Taxpayers must file a petition with the Tax Court within 90 days after the deficiency notice is mailed (150 days if the person is outside the United States) (sec. 6213). If the petition is not filed within that time period, the Tax Court does not have jurisdiction to consider the petition.
House Bill
The provision requires the IRS to include on each deficiency notice the date determined by the IRS as the last day on which the taxpayer may file a petition with the Tax Court. The provision provides that a petition filed with the Tax Court by this date is treated as timely filed.
Effective date.–Notices mailed after December 31, 1998.
Senate Amendment
Same as the House bill.
Conference Agreement
The conference agreement follows the House bill and the Senate amendment.”
Based on the flush language of the three committee reports issued in connection with the consideration and enactment of the Internal Revenue Service Restructuring and Reform Act of 1998, it seems pretty clear that Congress understood the 90-day rule to be jurisdictional.
That’s why Congress found it imperative to require the IRS to include on each deficiency notice the date determined by the IRS as the last day on which the taxpayer may file a petition with the Tax Court. It’s probably also why the Court’s statement (see above) – that Congress has amended many times over many years the provision that contains the 90-day rule yet “declined . . . to say anything specific about whether the [filing deadline] imposes a jurisdictional bar” – is accurate, but not for the reason it intended.
The Court begins with the conclusion that the rule is not jurisdictional, and on that basis concludes further that Congress considered the question, decided the 90-day rule was not jurisdictional, and declined to state otherwise.
Based on the legislative history, however, Congress did not think it necessary to revise the language of the 90-day rule because it believed its jurisdictional implications were obvious (as, indeed, they were to almost all of us until recently).
Beyond this legislative history, there are other Code provisions that don’t make sense unless the 90-day rule is jurisdictional.[xxxi]
For example, section 7451 of the Code provides that, in any case in which a “filing location”[xxxii] is inaccessible or otherwise unavailable to the general public on the date a Tax Court petition is due (the 90th day), the relevant time period for filing such petition shall be tolled for the number of days within the period of inaccessibility plus an additional 14 days.
In addition, section 6214 of the Code, in describing matters within the Tax Court’s jurisdiction, provides as follows
“. . . in redetermining a deficiency of income tax for any taxable year or of gift tax for any calendar year or calendar quarter shall consider such facts with relation to the taxes for other years or calendar quarters as may be necessary correctly to redetermine the amount of such deficiency, but in so doing shall have no jurisdiction to determine whether or not the tax for any other year or calendar quarter has been overpaid or underpaid. Notwithstanding the preceding sentence, the Tax Court may apply the doctrine of equitable recoupment to the same extent that it is available in civil tax cases before the district courts of the United States and the United States Court of Federal Claims.”
Applying the Circuit’s above reasoning in reverse, if Congress intended the Tax Court to apply the doctrine of equitable tolling in the case of a late petition, why didn’t it say so in the language of the 90-day rule as it did in the above-cited jurisdictional provision?
With the Circuit split, this issue is bound for the Supreme Court. Let’s wait and see.
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The opinions expressed herein are solely those of the author(s) and do not necessarily represent the views of the Firm.
[i] John Wick Chapter 2 (2017).
[ii] Not merely “guidelines” of the kind found in the Pirate’s Code, at least according to Captain Barbosa in Pirates of the Caribbean.
[iii] “In such condition, there is . . . continual fear and danger of violent death. And the life of man, solitary, poor, nasty, brutish, and short.” Chapter XIII of Thomas Hobbes’s Leviathan (1651).
As in so many cases, however, look first to Aristotle: “For man, when perfected, is the best of animals, but, when separated from law and justice, he is the worst of all; since armed injustice is the more dangerous, and he is equipped at birth with arms, meant to be used by intelligence and virtue, which he may use for the worst ends. Wherefore, if he have not virtue, he is the most unholy and the most savage of animals, and the most full of lust and gluttony.” Part II, Book One, Politics.
[iv] According to the IRS, there are over 840,000 individuals with current preparer tax identification numbers, almost 27,000 tax attorneys, over 207,000 CPAs, and almost 64,000 enrolled agents. https://www.irs.gov/tax-professionals/return-preparer-office-federal-tax-return-preparer-statistics.
[v] Tax litigation occurs in the Tax Court, the District Courts, the Court of Federal Claims, the Courts of Appeals, the Bankruptcy Courts, and the Supreme Court.
[vi] IRC Sec. 7441 states as follows:
“There is hereby established, under article I of the Constitution of the United States, a court of record to be known as the United States Tax Court. The members of the Tax Court shall be the chief judge and the judges of the Tax Court. The Tax Court is not an agency of, and shall be independent of, the executive branch of the Government.”
[vii] These are assisted by Senior Judges (basically, former judges who may be recalled to serve), and Special Trial Judges (who are appointed by the Chief Judge of the Tax Court).
[viii] https://www.taxpayeradvocate.irs.gov/wp-content/uploads/2024/12/ARC24_MostLitigatedIssues.pdf.
[ix] A taxpayer would otherwise have to pay the additional tax, file a claim for refund, then wait for the claim to be rejected or 6 months (whichever occurs first) to bring suit at a District Court or at the Court of Claims.
[x] Including the regulations promulgated thereunder, as well as any rulings and other interpretations the IRS is authorized to issue.
[xi] Where the tax has been self-assessed.
[xii] Where the tax return is filed late or where the tax reported as owing is paid late, the IRS will seek to collect the interest charged, and any penalties imposed, under the Code.
[xiii] For example, an item of income is missing or the taxpayer failed to substantiate a deduction claimed.
[xiv] The so-called 30-day letter. Where there is good reason for an extension, the IRS will extend the time for submitting this protest.
[xv] Most consents expire on the date specified in the consent.
[xvi] Such an extension will also allow the taxpayer to provide further documentation to support their position, or to request an appeal if they do not agree with the examiner’s findings.
[xvii] The IRS is required to send any statutory notice of deficiency to a taxpayer’s last known address by certified or registered mail. The last known address is generally the address which appears on the taxpayer’s most recently filed and properly processed federal tax return unless the IRS is given clear and concise notification of a different address.
[xviii] In addition to the amount of tax due, the notice will include the amount of interest owing on the unpaid tax, and perhaps penalties.
[xix] If the taxpayer petitions the Tax Court, they will generally have an opportunity for a pretrial settlement. If agreement cannot be reached, the case will be heard by the Court.
If the taxpayer does not petition the Tax Court, the amount shown of their notice of deficiency will be assessed and the taxpayer will have to make arrangements for payment of the amount owing.
[xx] Buller v. Comm’r, No. 24-1557 (2nd Cir. 2025).
You might say New Yorkers have a special affinity for the Second Circuit because, under the Golsen Rule, our appeals from Tax Court decisions would be to that Circuit.
[xxi] I.e., before the expiration of the statute of limitations for assessment of tax for the taxable year in question. IRC Sec. 6501.
[xxii] IRC Sec. 6213(a),
[xxiii] Quoting Boechler, P.C. v. Comm’r, 596 U.S. 199 (2022).
[xxiv] Quoting Arbaugh v. Y & H Corp., 546 U.S. 500 (2006).
[xxv] Actually, the Circuit Court was more eloquent: “We therefore must decide with fresh eyes whether the filing deadline in section 6213(a) is a limitation on the Tax Court’s jurisdiction.”
[xxvi] Sec. 3463 of P.L. 105-206.
[xxvii] https://www.tigta.gov/articles/press-releases/ongoing-challenge-implementation-internal-revenue-service-restructuring-and.
[xxviii] Sec. 347 of the House bill, H.R. 2676; H. Rept. 105-364. (emph. added)
[xxix] Sec. 3463 of the Senate amendment; S. Rept. 105-174 (emph. added)
[xxx] H. Rept. 105-599. (emph. added)
[xxxi] For example, IRC Sec. 6213(c).
[xxxii] The term “filing location” means the office of the clerk of the Tax Court, or any on-line portal made available by the Tax Court for electronic filing of petitions.
