By Eli S. Noff, Esq., CPA, Partner
Mary Lundstedt, Esq.
The taxpayer in Berkun v. Commissioner1 ultimately raised two collection due process arguments too late for consideration on appeal, but the Eleventh Circuit apparently found them worthy enough to highlight in a published opinion. Although the Eleventh Circuit uses a popular Seinfeld reference to describe its own non-substantive ruling in Berkun as potentially appearing to be an opinion “about nothing,”2 the opinion puts practitioners on notice of two arguments that could actually be something when properly raised.
Per Internal Revenue Code (I.R.C.) §§6320 and 6330, when the IRS issues a Notice of Intent to Levy (NOIL) or a notice of a federal tax lien, the IRS must provide the taxpayer with both written notice and an opportunity for an administrative hearing. The taxpayer has 30 days from the mailing of the notice to request a collection due process hearing. If that request is timely, the taxpayer is then entitled to have the Tax Court review the administrative determination. On the other hand, if the request is untimely, then the taxpayer is only allowed an “equivalent hearing,” which is not subject to further judicial review.
The case involves a collection due process (CDP) request and focuses on the sufficiency of notice. In 2010, taxpayer pled guilty to filing a false income tax return, and a variety of other federal charges. He was incarcerated and ordered to pay the Internal Revenue Service (IRS) restitution in the amount of $390,595. In January of 2013, while incarcerated, taxpayer asked the IRS to send all notices to his federal prison mailing address. However, taxpayer later filed tax returns while in prison—both of which listed his home address in Florida.
In September of 2014, the Revenue Officer (RO) assigned to collect the restitution-based assessment resulting from the false tax return attempted to call taxpayer at the prison, but the call was not answered. Shortly thereafter, the RO visited the home address and left his card there, because no one was at the residence. Subsequently, taxpayer’s attorney contacted the RO and advised him that taxpayer would be in a halfway house in November.
The IRS issued a NOIL on November 3, 2014, in order to collect the assessment. This NOIL was mailed to the Florida address. Taxpayer’s girlfriend signed the NOIL’s receipt card on his behalf.
On January 5, 2015, taxpayer and the revenue officer spoke for the first time. The revenue officer provided taxpayer with the NOIL, and taxpayer stated that this was the first he had heard of the NOIL.
Taxpayer filed a request for a collection due process hearing with thirty days of that meeting, and the revenue officer treated the requests as timely since taxpayer had not received the NOIL earlier. However, the IRS Office of Appeals determined that the request was untimely and held an equivalent hearing, instead. The Office of Appeals issued a notice of decision, explaining to taxpayer that he could not appeal to the Tax Court, unless he could show that his collection due process request was timely.
Taxpayer went to Tax Court, where the IRS moved to dismiss for lack of jurisdiction due to an untimely request. The motion was granted when taxpayer failed to respond. Subsequently, the Tax Court denied taxpayer’s motion to vacate dismissal, and taxpayer appealed to the Eleventh Circuit.
At trial, taxpayer first argued that under the due process clause, the IRS was required to send the NOIL to his Miami prison address. This argument relied on non-tax case law related to notices of forfeiture which indicates that such notices must be sent to an incarcerated person’s prison address3. As such, taxpayer maintained that the notices were insufficient and his request was timely since he filed it within thirty days of receipt of the notice from the revenue officer; thus, Tax Court had jurisdiction over the matter.
The IRS maintained that per treasury regulations, “a taxpayer’s last known address is the address that appears on the taxpayer’s most recently filed and properly processed Federal tax return.” 4
Although the court would not consider this argument since the taxpayer failed to raise it in Tax Court, the Eleventh Circuit still noted that:
Mr. Berkun’s argument that due process requires the IRS to send NOILs to incarcerated taxpayers at their prison addresses presents one plausible application of Dusenbery and its progeny, particularly in a situation like this one where the incarceration is based in part on a criminal tax offense and the taxpayer has requested the IRS to send tax correspondence to his place of incarceration.5
Next, taxpayer presented the legislative history behind the development of the collection due process procedure, arguing that:
[F]or the purpose of CDP hearings the Conference Committee was concerned with actual receipt of notices of deficiency, rather than simply constructive receipt accomplished through mailing notice to a taxpayer’s last known address.6
The IRS deflected the argument rather summarily by stating that it was not properly raised in Tax Court, and that the Tax Court had dismissed the matter based on the existing I.R.C. §6330 language, regulations and precedent.
Ultimately, the court agreed with the IRS that both arguments were not properly raised in Tax Court, and thus, could not be considered. However, it is noteworthy that the court wrote a published opinion highlighting the two arguments that it couldn’t rule upon. Going forward, taxpayers and practitioners working with similar circumstances should consider properly raising these arguments when applicable.
1890 F.3d 1260 (11th Cir. 2018).
2Cf. Seinfeld: The Pitch (NBC television broadcast Sept. 16, 1992).
3 See, e.g., Dusenbery v. United States, 534 U.S. 161 (2002), United States v. Williams, 130 F. App’x 301 , 302 (11th Cir. 2005), and United States v. McGlory, 202 F.3d 664 , 672 , 674 (3d Cir. 2000) (en banc
5 Berkun, 890 F.3d at 1264.