Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-14-01004/USCOURTS-caDC-14-01004-0/pdf.json

Parties Involved:
Commissioner of Internal Revenue Service
Appellee
Lisa A. Edwards
Appellant
Joseph P. Thomas
Appellant

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 19, 2015 Decided June 19, 2015

No. 14-1004

LISA A. EDWARDS AND JOSEPH P. THOMAS,

APPELLANTS

v.

COMMISSIONER OF INTERNAL REVENUE SERVICE,

APPELLEE

On Appeal from the Order of 

the United States Tax Court

Bruce E. Gardner argued the cause and filed the briefs 

for appellants. 

Janet A. Bradley, Attorney, U.S. Department of Justice, 

argued the cause for appellee. With her on the brief were 

Tamara W. Ashford, Acting Assistant Attorney General at the 

time the brief was filed, Bruce R. Ellisen, Attorney. Bridget 

M. Rowan, Attorney, entered an appearance.

Before: GARLAND, Chief Judge, and ROGERS and 

PILLARD, Circuit Judges.

Opinion for the Court filed by Circuit Judge PILLARD.

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PILLARD, Circuit Judge: Both parties to this appeal agree 

that the tax court lacked jurisdiction to consider the petition 

filed by taxpayers Lisa Edwards and Joseph Thomas

challenging the seizure of their funds by the Internal Revenue 

Service. What they disagree about is why, and the reason 

turns out to make a great deal of difference. According to the 

taxpayers, the tax court lacked jurisdiction because the IRS

never sent them notices of deficiency, which are the 

documents the Service is required to send before it initiates 

proceedings to assess a tax deficiency, and which serve as 

taxpayers’ “tickets” to tax court. Prevailing on that ground 

could mean the taxpayers do not owe the taxes the IRS 

claims, and could entitle them to recover the costs they 

incurred to challenge the IRS’s seizure of their property. The 

IRS counters that it sent the taxpayers the notices of 

deficiency, and the tax court lacked jurisdiction because the 

taxpayers waited too long to file their petition. Prevailing on 

that ground would leave the tax assessment undisturbed. The 

IRS sought in the tax court to dispute the taxpayers’ allegation 

that notices were never successfully sent to the taxpayers in 

the first place. The IRS asserts that it could not provide the 

best evidence of that mailing because, when it sought to 

retrieve its own copies of the notices from storage, the 

package containing the notices was lost or misplaced. 

Without that evidence, the tax court initially agreed with the 

taxpayers and dismissed their petition for lack of jurisdiction

for want of notices of deficiency. When the prevailing 

taxpayers moved for costs, however, the tax court vacated its

decision and, in a second order, dismissed the case for lack of 

jurisdiction and denied costs. Unlike the initial order, 

however, the second order did not state its grounds. Because

the tax court was required to articulate the basis for its 

jurisdictional dismissal, we vacate the tax court’s order and 

remand for the court to do so. 

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I.

In 2009, the IRS selected the taxpayers’ recent returns for 

examination and concluded that the taxpayers had a tax 

deficiency of more than $9,000 for tax year 2007 and that 

Thomas individually had a deficiency of more than $15,000 

for 2008.1 The IRS contends that on March 11, 2010, it 

mailed both of the taxpayers a notice of deficiency for 2007 

and Thomas a notice of deficiency for 2008. The taxpayers 

contend, however, that they never received notices of 

deficiency for either year. 

The Internal Revenue Code requires the IRS to follow 

specific procedures before it assesses and collects an income 

tax deficiency. The IRS must “send a notice of deficiency to 

a taxpayer prior to initiating proceedings to assess [a] 

deficiency.” Gardner v. United States, 211 F.3d 1305, 1311 

(D.C. Cir. 2000); see also I.R.C. §§ 6212(a), 6213(a).2 The 

Code provides that the IRS may satisfy its obligation by 

mailing a notice to the taxpayer’s last known address via 

certified or registered mail; there is no requirement that the 

IRS prove that the taxpayer actually received the notice. 

I.R.C. § 6212(a)-(b); see also Keado v. United States, 853 

F.2d 1209, 1211-12 (5th Cir. 1988). After the IRS issues a 

notice of deficiency, a taxpayer typically has ninety days to 

file a Section 6213 petition in tax court challenging the 

deficiency. See I.R.C. § 6213(a); Gardner, 211 F.3d at 1311. 

The IRS cannot assess a tax deficiency or bring a collection 

 1 Taxpayers Edwards and Thomas were married and filed a joint 

return for tax year 2007. They filed their federal taxes in 2008 as 

“married filing separately.” Edwards’s 2008 return is not at issue 

here. 2 Unless otherwise specified, all statutory citations are to the 

Internal Revenue Code of 1986, as amended, codified in Title 26 of 

the U.S. Code. 

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action against the taxpayer unless it has sent a notice of 

deficiency to the taxpayer and either the ninety-day period for 

filing a tax court petition has run or, if the taxpayer has filed a 

petition, the tax court has rendered a final decision.3

 Keado, 

853 F.2d at 1212; see also I.R.C. § 6213(a). The tax court 

does not have jurisdiction to consider a taxpayer’s Section 

6213 petition unless the IRS has first issued the taxpayer a 

notice of deficiency. See, e.g., Shepherd v. Commissioner, 

147 F.3d 633, 634 (7th Cir. 1998). The tax court also lacks

jurisdiction if the taxpayer’s petition is not timely filed. See, 

e.g., Correia v. Commissioner, 58 F.3d 468, 469 (9th Cir. 

1995); Zigmont v. Commissioner, 97 T.C.M. (CCH) 1202 

(2009), 2009 WL 564949, at *4-5. A taxpayer who fails to 

file a timely petition in tax court is not without legal recourse. 

The taxpayer can pay the tax, file a claim for refund with the 

IRS, and, if the claim is denied, file a refund suit in federal 

district court or the court of claims. See I.R.C. § 7422.

The taxpayers filed a petition in the tax court in 2012, 

after the IRS retained several of their tax refunds and applied

those funds to their outstanding tax liabilities. The petition

alleged that the IRS violated due process of law by failing to 

issue notices of deficiency before assessing tax liabilities 

against the taxpayers and by failing to issue final notices of 

intent to levy before levying the taxpayers’ assets. The IRS 

 3 A deficiency is the difference between the amount of tax imposed 

by the tax code and the amount of tax shown on the taxpayer’s 

return. I.R.C. § 6211(a); Keado, 853 F.2d at 1210 n.1. An 

assessment of a deficiency is a bookkeeping notation made when 

the IRS in its records establishes an account against the taxpayer. 

Laing v. United States, 423 U.S. 161, 170 n.13 (1976); see also 

I.R.C. § 6203. If the IRS fails properly to assess the tax, the 

taxpayer is not obligated to pay the tax. Welch v. United States, 

678 F.3d 1371, 1376 (Fed. Cir. 2012); see also I.R.C. §§ 6213(a), 

6401(a). 

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moved to dismiss the petition for lack of jurisdiction because 

it was filed more than ninety days after the Service sent the 

taxpayers notices of deficiency. The IRS, however, was 

unable to produce copies of the notices of deficiency that it 

claims to have sent because, it says, the administrative files 

containing copies of the notices were lost in the mail when the 

IRS attempted to retrieve them from storage. Instead, the 

Service produced a declaration from an IRS employee and a 

postal service mail log form as evidence that it had created 

and sent the notices to the taxpayers’ last known addresses. 

The mail log did not indicate, however, what was mailed. 

The taxpayers opposed the IRS’s motion and cross-moved for 

dismissal on the ground that the tax court lacked jurisdiction 

because the IRS never issued notices of deficiency. After a 

hearing, the tax court issued an order in June 2013, granting 

the taxpayers’ motion and dismissing the case for lack of 

jurisdiction on “the ground that there has been no showing 

that a notice of deficiency has been issued to either [taxpayer] 

for any of the years placed in dispute in the petition.” J.A. 

171-72. 

The case was then administratively closed before the

taxpayers timely submitted their claim for litigation and 

administrative costs. The presiding tax court judge insisted 

that he could not consider the claim for costs unless he 

reopened the case and vacated his dismissal order. The 

taxpayers accordingly moved to vacate the tax court’s order to 

obtain consideration of their motion for costs. The tax court 

held a hearing on the motion to vacate at which the judge 

made sure the taxpayers were aware that, if the order were

vacated, the IRS might in the meantime locate the lost notices 

of deficiency and ask the court to revisit its jurisdictional 

ruling before the court could reinstate it together with a ruling 

on costs. The judge said he might well grant such a request, 

but added that he would not revisit his earlier ruling in the 

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absence of new evidence. The tax court then issued an order 

granting the motion to vacate, held in abeyance the renewed 

cross-motions to dismiss for lack of jurisdiction, and 

permitted the Service to oppose the motion for costs. The IRS 

conceded that the taxpayers were the prevailing party, but 

argued that the taxpayers were not entitled to some of the 

costs they claimed, and that the amounts they requested were, 

in any event, not reasonable. The IRS did not locate the lost 

files after the motion to vacate was granted.

In December 2013, the tax court issued an order denying 

the taxpayers’ motion for costs and once again dismissing the 

petition for lack of jurisdiction. The tax court’s December 

order of dismissal, however, was not as clear as its June order. 

The new order recounted the IRS’s argument that the Service 

had issued and mailed the taxpayers notices of deficiency, and 

described the evidence the Service presented in support of 

that contention. The court then observed that the taxpayers

disputed that the notices were issued. Unlike the first order, 

however, the December order did not resolve whether the 

notices had in fact been issued, but merely stated that it was 

“clear in this matter . . . that the Court has no jurisdiction over 

[the taxpayers’ petition].” J.A. 251. The court went on to 

address the litigation costs question, denying the taxpayers’ 

motion because the IRS’s position was substantially justified. 

The court concluded that it was dismissing the case sua 

sponte for lack of jurisdiction, thereby mooting both parties’ 

motions to dismiss. This appeal followed.

II.

We “review the decisions of the Tax Court . . . in the 

same manner and to the same extent as decisions of the 

district courts in civil actions tried without a jury.” I.R.C. 

§ 7482(a)(1). We thus review the tax court’s conclusions of

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law de novo and its findings of fact for clear error. Gaughf 

Props., L.P. v. Commissioner, 738 F.3d 415, 420 (D.C. Cir. 

2013). The taxpayers’ primary contention on appeal is a legal 

question: whether the tax court erred by failing to explain in 

its December order why it lacked jurisdiction to hear the 

taxpayers’ petition. We agree with the taxpayers that the tax 

court was under an obligation to state the basis of its dismissal

and erred here by failing to do so. 

The tax court is a court of limited jurisdiction, 

Commissioner v. McCoy, 484 U.S. 3, 7 (1987), and its 

jurisdiction is predicated on both the issuance of a notice of 

deficiency and the filing of a timely petition, see I.R.C. 

§ 6213(a). The parties have identified two reasons the court 

might have lacked jurisdiction in this case: either, as the 

taxpayers contend, the IRS never mailed them notices of 

deficiency, or, as the Service argues, it issued such notices, 

but the taxpayers did not timely file their petition in the tax 

court. The two reasons are, however, factually mutually 

exclusive, and, while either leads to jurisdiction-based 

dismissal, the consequences of dismissal differ depending on 

the court’s reasoning. See D’Andrea v. Commissioner, 263 

F.2d 904, 906-07 (D.C. Cir. 1959). When faced with such a 

choice, as tax court precedent recognizes, that court is 

required to state whether it lacks “jurisdiction because no 

statutory notice of deficiency has been issued or because a 

valid notice was issued but the petition was not timely filed.” 

Pietanza v. Commissioner, 92 T.C. 729, 735 (1989); see also 

Pyo v. Commissioner, 83 T.C. 626, 632, 639-40 (1984); 

Shelton v. Commissioner, 63 T.C. 193, 196-98 (1974). The 

tax court has also held that judges should resolve those issues 

in a particular order—they should first decide whether a 

notice of deficiency was properly issued before turning to 

whether the petition was timely filed. Shelton, 63 T.C. at 198. 

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Because the basis of dismissal may affect a taxpayer’s 

rights or the IRS’s ability to collect taxes owed, it is essential 

that the tax court clearly state the grounds for its dismissal. If 

the tax court determines that a notice of deficiency was not 

properly issued, then the IRS may not assess the deficiency or 

seek to collect it from the taxpayers. See, e.g., Keado, 853 

F.2d at 1212; United States v. Zolla, 724 F.2d 808, 810 (9th 

Cir. 1984); Shelton, 63 T.C. at 195; see also I.R.C. § 6213(a). 

If the statute of limitations has already run, the IRS cannot 

simply correct its error by issuing a new notice of deficiency. 

In that event, the taxpayer’s liability becomes unenforceable.

Alternatively, if the court dismisses the case because the 

taxpayer did not file a timely petition, the Service is free to 

assess and collect the tax. Pietanza, 92 T.C. at 735; Shelton, 

63 T.C. at 194, 197. Accordingly, the tax court must 

articulate the basis for its order to inform the parties of the 

rights and obligations it establishes. 

The opacity of the tax court’s December order is apparent 

when it is contrasted with the June order. The court’s first 

dismissal order expressly denied the IRS’s motion and 

granted the taxpayers’ motion, specifying that the court 

lacked jurisdiction on “the ground that there has been no 

showing that a notice of deficiency has been issued to either 

[taxpayer] for any of the years placed in dispute in the 

petition.” J.A. 171-72. The December order, by contrast, 

stated merely that it was “clear” that the court lacked 

jurisdiction, whether or not the notices of deficiency had been 

issued by the IRS. J.A. 251. The court’s December denial of 

both parties’ motions and its terse order undercut any 

contention that it resolved precisely why jurisdiction was 

lacking in this case. We therefore vacate the December order 

and remand this case to the tax court to give that court an 

opportunity to state its reasons for dismissing the petition. 

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The Service urges us to conclude that the tax court’s 

December order found as a matter of fact that the notices of 

deficiency were issued and concluded that it lacked 

jurisdiction because the petition was not timely filed. But the 

portion of the order discussing the jurisdictional question only 

observed that the parties disputed whether the notices were 

issued, without announcing any resolution of the question. 

The IRS’s interpretation of the December order takes out of 

context the court’s statement that the evidence presented by 

the IRS “strongly suggest[ed]” that notices of deficiency were 

issued to the taxpayers, “even though the existence of those

notices of deficiency cannot be supported by a review of a 

copy of them.” See J.A. 252. The court made that statement 

when evaluating the motion for costs, which required the 

court to determine whether the IRS’s position was 

substantially justified. In acknowledging the IRS’s position 

as arguable, however, the court did not adopt it. That 

language does not support the Service’s interpretation of the 

order. 

The taxpayers, for their part, do not contend that the tax 

court ruled in their favor in its second order, but that it lacked 

the authority to rule against them. Their motion to vacate the 

June order was filed, they argue, for the “limited purpose” of 

seeking litigation costs, a collateral issue distinct from the 

underlying jurisdictional question. See J.A. 173. Without any 

reason to revisit its jurisdictional holding, the taxpayers assert 

that the tax court was bound by the jurisdictional holding of 

the June order. Because the basis for the court’s December 

order is unclear, we cannot discern whether the tax court 

changed its mind between the two orders. Accordingly, we

decline to consider the taxpayers’ argument before the tax 

court has had an opportunity to explain clearly the grounds 

upon which its decision rests. When the copies of the notices 

themselves have been lost, determining whether notices ever

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issued is a fact-intensive inquiry dependent on evidence of 

various circumstances, such as the IRS’s regular practices for 

creating and mailing notices. See, e.g., Welch v. United 

States, 678 F.3d 1371, 1379-82 (Fed. Cir. 2012); United 

States v. Aherns, 530 F.2d 781, 784-85 (8th Cir. 1976); 

Pietanza, 92 T.C. at 731-42; Webb v. Commissioner, 72 

T.C.M. (CCH) 826 (1996), 1996 WL 558320, at *5-6. The 

tax court has routine factfinding capabilities, and expertise 

and experience in evaluating just such evidence, so we leave 

it to the tax court to determine in the first instance the 

adequacy of any proof that the notices were in fact issued. 

III.

The taxpayers raise three other arguments on appeal that 

warrant only brief discussion. First, the taxpayers ask us to 

reverse the tax court’s denial of their motion for costs. A 

prevailing party is not entitled to recover costs from the IRS if 

the Service’s litigation position was “substantially justified.” 

I.R.C. § 7430(c)(4)(B)(i). Evaluation of which party 

prevailed and, if the taxpayers prevailed, whether the IRS’s 

position was justified, depends in large part on the adequacy 

of the evidence that the notices were issued. Because the 

costs claim will be affected by the grounds of the tax court’s 

jurisdictional ruling, we vacate the tax court’s denial of the 

taxpayers’ motion for costs and leave it to the tax court to

decide the taxpayers’ motion anew, in light of the 

jurisdictional rationale it adopts. 

The taxpayers also contend that the tax court overlooked 

the second argument raised in their petition. They assert that 

the IRS failed to mail them a final notice of levy for the 2007 

and 2008 tax years before seizing their assets, in violation of 

the Internal Revenue Code and the Due Process Clause. See

I.R.C. § 6330(a)(1). A final notice of levy permits a taxpayer 

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to request a collection due process hearing before the IRS’s 

Appeals Office. See id. After such a hearing, the IRS issues 

the taxpayer a notice of determination, which permits the 

taxpayer to seek tax court review of the IRS’s proposed 

levies. See id. § 6330(d)(1); Boyd v. Commissioner, 451 F.3d 

8, 10-11 (1st Cir. 2006). Before the tax court, the parties 

agreed that no notice of determination had been issued, but 

did not explore the legal consequences of that fact. The tax 

court’s December order did not address the taxpayers’ 

alternative ground for jurisdiction. On remand, therefore, the 

tax court must first determine whether the parties have 

preserved their arguments concerning this issue. If so, it 

should explain whether it has jurisdiction over the taxpayers’ 

claim that the IRS impermissibly failed to issue a final notice 

of intent to levy before levying the taxpayers’ assets, and spell 

out the reasons for its jurisdictional holding. Compare Boyd, 

451 F.3d at 10-11 (affirming the jurisdiction-based denial of a 

petition contending the IRS improperly denied taxpayers the 

process that would have led to a notice of determination), with

Kennedy v. Commissioner, 116 T.C. 255, 261 (2011)

(dismissing petition on jurisdictional grounds because the IRS 

failed to mail the required notice to taxpayer before filing a 

lien).

Finally, we lack jurisdiction to consider a new argument 

the taxpayers attempt to raise for the first time on appeal. The 

taxpayers state that taxpayer Thomas requested the IRS 

conduct a collection due process hearing concerning his 2008 

tax liability after the taxpayers filed their petition in the tax 

court. According to the taxpayers, the IRS’s Appeals Office

conducted the hearing but impermissibly withheld a notice of 

determination following the hearing, which precludes Thomas 

from seeking tax court review of the IRS’s decision. The 

taxpayers’ counsel admitted at oral argument that he never 

asked the tax court to rule on this particular issue. Oral Arg. 

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Recording at 7:54-8:51. Consequently there is nothing for us

to review. See McCoy, 484 U.S. at 6; see also Oral Arg. 

Recording at 8:43-8:51 (counsel conceding as much).

* * *

For the foregoing reasons, we vacate the tax court’s 

decision and remand for further proceedings consistent with 

this opinion.

So ordered.

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