Suspensions of Statute of Limitations Make Collection Suit Timely (5/27/20)

In United States v. Weiss (E.D. Penn Dkt. 19-502 Order dated 5/21/20), here [GS here], the Court denied the taxpayer’s statute of limitations defense in a collection suit where the Government seeks judgment on the assessment.  The issue was whether the Government timely filed its suit to obtain judgment on assessments based on delinquent returns filed on October 10, 1994.  The assessments were made later in October 1994.  Those assessments triggered the 10-year collection statute of limitations under § 6502(a)(1).  The Government brought the collection suit on February 5, 2019, over 14 years after the collection statute would have normally expired on in October 2004.  The devil, of course, is in the word "normally."  The IRS cannot unilaterally extend or suspend the statute of limitations, but the taxpayer can take actions that will do so.  The trajectory of those actions are what caused the collection suit to be timely.

In my view, there is nothing particularly surprising in the way the Court pieced together the events causing the suspensions to apply over the years.  Although not surprising, the trajectory is a good lesson particularly for students trying to understand how suspensions work.  Indeed, I used to teach these in my class, with examples, and then, on the exam, would have a fact pattern starting with a notice of deficiency through the Tax Court proceeding and appeal (including a petition for certiorari) and ask the students to answer the earliest date the IRS could assess and the latest date the IRS could assess.  For each answer I wanted a specific date and then the relevant Code section(s), with any further explanation the student desired.  Usually the Code section(s) would be sufficient to tell me that they had the basis for the answer.

So, this case reminded me of my teaching and examinations.  For students of tax procedure the case is a good read.  I won’t summarize it because it is fairly short and well written.  I will say that the key legal issue is whether a petition for certiorari is an appeal that is within the suspension period for appeals under § 6330(e)(1), here.  So, I offer the facts from the opinion (these are just the facts, with references to Code and Regulations sections, usually in footnotes, omitted).  I invite readers to perform their own analysis of the statute suspensions (Note that I am including in the block quote below only the facts I think pertinent for the analysis and am using the cleaned up technique to eliminate discussion not relevant to the fact trajectory):

On October 10, 1994, Weiss late-filed his income tax returns for those years, self-reporting  liability of $299,202. (See id. at 2-6.) Later that month, the Government made tax assessments against him based on his admitted liability. (Id.)  

Under Section 6502(a)(1), the statute of limitations would have expired in October 2004. This statute can be tolled, however, by certain actions of a taxpayer, including the filing of a bankruptcy petition. 26 U.S.C. § 6503(h). In Weiss’s case, the statute of limitations was tolled when he filed for bankruptcy three times between 1994 and 2009. 

Finally, on February 11, 2009, the Government informed Weiss in a Collection Due Process (“CDP”) Notice of its intent to collect his past due taxes by levy. 2 

On either March 13 or March 14, 2009, Weiss mailed IRS Form 12153 to request a CDP hearing for tax years 1986 through 1991. 

On January 22, 2010, IRS Appeals conducted a [CDP] hearing over the telephone. IRS Appeals rejected his claims.

On June 8, 2011, Weiss filed a petition to the United States Tax Court for review of the decision by IRS Appeals. On August 22, 2016, the Tax Court affirmed the ruling of IRS Appeals. 

On November 23, 2016, Defendant appealed the Tax Court’s decision to the United States Court of Appeals for the District of Columbia Circuit. On May 22, 2018, that court affirmed the Tax Court decision, agreeing that the statute of limitations had not expired.  On July 27, 2018, a petition for rehearing en banc was denied. 

On October 24, 2018, Weiss filed a petition for a writ of certiorari to the United States Supreme Court, seeking review of the D.C. Circuit’s ruling. On December 3, 2018, the petition for a writ of certiorari was denied.  

On February 5, 2019—64 days after the Supreme Court denied the petition for writ of certiorari—the Government brought the present action against Weiss to reduce to judgment his unpaid assessments plus statutory additions for the years 1986 through 1991, which now totaled $773,899.84.

Finally, students might consider § 7482(a), here, which is not mentioned in the Weiss opinion.