On March 12, 2020, the Tax Court issued its opinion in Lander v. Commissioner (154 T.C. No. 7). The issue presented in Lander v. Commissioner was whether the petitioners, who did not receive the statutory notice of deficiency (SNOD) mailed to their last known address, could challenge their underlying tax liability in a collection due process (CDP) proceeding.
Public Service Announcement from Lander v. Commissioner
You may have come to this post because you are interested in IRC § 6330’s notice and receipt requirements. You may have come to this post because you are interested in what happens when a taxpayer is mailed a notice of deficiency to an address where he does not live anymore. You may have come by chance (fate, really). You may even have come by mistake (still fate).
No matter why you are here, you really should stay to learn what happens to the erstwhile-favorite son of Dixie County, Florida, whose three lives – as the County Attorney for Dixie County, as a private attorney embezzling from Dixie County, and as a fake ethnocentric vitamin kingpin, came crashing down around him, only to have the U.S. Postal service be deputized to dole out the harsh hand of Fate.
Truth is truly stranger than fiction.
Prologue to the Lander Saga: Obligatory Legal Analysis of the Lander Opinion, A.K.A. Why You Clicked on the Post in the First Place
If a person is liable for a tax and does not pay after the IRS asks politely, the amount of the tax and any penalties, interest, etc. becomes a lien in favor of the IRS for such amount. IRC § 6321. Simple, right? Sixty-five words in the actual statute.
Couldn’t be that powerful, right?
Think again; in fact, imagine a swath of hundreds of thousands of beaten, battered litigants in the wake of this little Code section like a swath cut out of the Russian countryside as Napoleon marched towards Moscow. Now pull it back a little. I might have gotten a little carried away, but not too much. This is a deceptively impactful little statute that will bear more explanation in another post.
Once a lien arises, the IRS may put the world on notice of the lien by filing a lien notice where the real property is located and one office where personal property is located, if different. IRC § 6323(a), (f). Once the IRS files a notice of lien, they must provide the taxpayer a notice regarding the notice of lien called a Notice of Federal Tax Lien (NFTL). This notice’s notice must be mailed within five days of the filing of the original notice. IRC § 6320(a)(1). This NFTL may be sent to the taxpayer’s last known address under IRC § 6320(a)(2), and must contain, among other things, yet another notice, which is a notice of the taxpayer’s right to administratively appeal the lien under IRC § 6320(a)(3)(b).
This is, as you might imagine, a gross oversimplification of this process, but it gets us to where we need to be for analysis of the issues in Lander, which gets us closer to the story of how someone named Joey (and not “Joey the Fist” – just plain Joey) managed to launder over $800,000 in a county, the per capita income of which was under $13,000. Even operating a chain of coin laundries, that’s still a tall task.
What happens if a taxpayer doesn’t receive the NFTL because he no longer resides at his former address? This was chief among the questions faced by the Tax Court in Lander. To begin with, the Tax Court observed that the IRS bore (and satisfied) the burden of proving proper mailing of a notice of deficiency by competent and persuasive evidence. See Cataldo v. Commissioner, 60 T.C. 522, 524 (1973), aff’d per curiam, 499 F.2d 550 (2d Cir. 1974); August v. Commissioner, 54 T.C. 1535, 1536-37 (1970). Note, this is a burden of proof not production. For a discussion of the difference in the burdens, take a look at the post in Frost v. Commissioner, 154 T.C. No. 2.
The act of mailing may be proven by evidence of the IRS’s mailing practices corroborated by direct testimony or documentary evidence of mailing. See Magazine v. Commissioner, 89 T.C. 321, 326 (1987); Cataldo, 60 T.C. at 524; see also Fed. R. Evid. 406. A Form 3877 reflecting that the post office received an item of certified mail from the IRS represents direct documentary evidence of the date and the fact of mailing. See Magazine, 89 T.C. at 324, 326-327. A properly completed Form 3877 also reflects compliance with IRS established procedures for mailing a notice of deficiency. See Keado v. United States, 853 F.2d 1209, 1212-1213 (5th Cir. 1988).
A notice of deficiency may properly be mailed to the taxpayer’s last known address pursuant to IRC § 6212(b)(1), unless the IRS has actual reason to know that there has been a change of address. See August, 54 T.C. at 1536. Finally, as the coup de grace, the Tax Court agreed with Counsel that it has long been held (even in 1987, the doctrine was apparently “well settled”) that mailing a SNOD to a taxpayer’s last known address satisfies the notice requirements of IRC § 6330(a)(1)-(2) and the receipt requirements of IRC § 6330(c)(2)(B), even if the taxpayer does not physically receive the SNOD. See Yusko v. Commissioner, 89 T.C. 806, 810 (1987).
Applying these steps to Lander, we find that they add up to an analytical victory for the IRS, albeit a troubling loss for the taxpayers. First, a SNOD was issued at the right time and with the right information included therein. IRC § 6330(a)(1)-(3). Second, the IRS produce evidence that the mailing was timely made and to a certain address. See Magazine, 89 T.C. at 324, 326-327. Third, the IRS produced evidence of the taxpayers’ last known address, which evidence the taxpayers did not dispute. Fourth, mailing a SNOD to the taxpayers’ last known address satisfies the Code’s notice requirements, even if the taxpayers do not physically receive the SNOD. IRC § 6330(a)(1)-(2); Yusko, 89 T.C. at 810. Fifth, because the taxpayer is deemed by longstanding precedent as having received the SNOD, the taxpayers cannot raise the issue of their underlying liability at their CDP hearing. Sixth, and finally, because the taxpayers did not raise the issue of their underlying liability in the CDP hearing, the taxpayers cannot raise it before the tax court. IRC § 6330(c)(2)(B); Goza v. Commissioner, 114 T.C. 176, 183 (2000).
I cannot fault Counsel for laying out the elements, supporting law, and facts on a silver platter for Special Trial Judge Guy (whose findings of fact and conclusions of law were adopted by Tax Court Judge Goeke). Kudos to Counsel.
So now, dear reader, you have had your meal of tax controversy analysis, but please, stay for the show. You will not regret it.
The Lander Saga, Part I: The Prodigal Son of Dixie County Florida: How the Empire of One Man with Two Fraudulent Legal Practices and a Fake Ethnocentric Vitamin Crumbled to the Ground
When Mr. and Mrs. Joseph Lander filed their delinquent 2005 income tax return on April 2, 2009 and amended in September 2009, they resided in Cross City, Florida, and they listed their Cross City address on both returns. An examination of their 2005 returns was initiated very soon thereafter.
For reference, Cross City is the county seat of Dixie County and, as of the 2010 Census, Cross City had 1,728 good, God-fearing, red-blooded, apple-pie loving citizens. (For further reference, I was born and raised in the state of sunshine, alligators, and oranges, and reading this opinion was the first time I learned that Florida has a Dixie County – for what it’s worth.) Just after the 2010 Census was taken, however, the population of Dixie County dropped markedly (to 1,727).
Subsequent to the audit, the County’s favorite son, Joseph “Joey” Lander, was sent up the river for seven-and-a-quarter years on sixteen counts of mail fraud and money laundering. This was a blow to Cross City and Dixie County as a whole, because Mr. Lander was the County’s attorney. By this I mean, not only was he the County Attorney for Dixie County, but in all likelihood, he was the only lawyer in Dixie County. See United States v. Lander, 668 F.3d 1289, 1292 (11th Cir. 2012). Carl, the County’s soil and water commissioner (and the county’s premier butcher-qua-taxidermist) never sat for the Bar Exam, so he doesn’t count.
Turns out, not only was there a likely conflict of interest between practicing as the Dixie County Attorney and the attorney in Dixie County, Mr. Lander was committing wire and mail fraud. It turns out that beyond being an “enterprising” (read: “morally destitute”) attorney, Mr. Lander was also an aspiring racial and ethnic vitamin mogul.*
I swear to all that is holy and good, I am not making this up.
*Author’s Note: Per the Federal opinion in an accompanying case: “According to Lander, [his vitamin company] marketed vitamins for specific racial and ethnic groups, and “it was the hottest thing on the market.” See Lander, 668 F.3d at 1293.
Mr. Lander was shaking down little old women for his ethnocentric vitamin startup and funneling cash from the County’s coffers (which, as you might have guessed, were the actual coffers in Lou Lou’s Diner on the corner of Tangerine St. and Grapefruit Ave.) to his law firm’s trust account for a “development” project.
The Lander Saga, Part II: the IRS, the Passive Aggressive Care Package, and a Red Crayola Marker
As a consequence of his 7-year sentence, Mr. Lander no longer lived in Cross City, Florida. As noted above, on both the original and amended returns in the box marked current address, the Landers entered their post office box in Cross City. Mrs. Lander had not been sitting idly by, however. She had her knitting and the bait and tackle shop. On July 29, 2011, the IRS mailed a 30-day letter to the Cross City P.O. Box., and Mrs. Lander was given a personal crusade against the Infernal Revenue Service.
Mrs. Lander compiled the evidence that would exonerate her family’s good name from the ignominy that was an IRS audit. The only evidence the Tax Court notes was contained in the “package” sent to the IRS was a single bank statement (October 2005) and a half-page, typewritten note from Mr. Lander, in which he politely stated that if the IRS “had any further questions” of the couple regarding their taxes, such questions should be directed to the Federal Correctional Institution in Morgantown, West Virginia (where he had been residing since February 2010), care of cell block J, cell 127, bottom bunk.
Meanwhile, back in what passes for reality in Dixie County, Florida, Mrs. Lander tied the package up with some butcher twine, and with a last salvo, wrote on it (with a red Crayola marker, is my guess) “FORMAL PROTEST.” She had half-a-mind to write a bit more, but she had not made it as far as her husband in school, and she wasn’t sure if the plural of “asshole” had an apostrophe or not, so she left it as is.
The IRS received the package, passed it around the office with raucous administrative laughter and spirited conversation. Bea in the mailroom had to sit a spell from the excitement. It was a fete. It is unclear what the IRS actually did with the package after Bea calmed herself, as the Tax Court notes only that the IRS did not treat the package as a “proper protest.” Having received no acknowledgment of her care package (rude), Mrs. Lander (apparently) resolved not to respond to another one of the IRS’s notices.
On November 16, 2011, however, the IRS did belatedly respond to Mrs. Lander’s care package with one of their own – a Statutory Notice of Deficiency – a duplicate of which was sent to Morgantown, “c/o cell block J, cell 127, bottom bunk.” Unfortunately, Mr. Lander was absent when the post was delivered, and so it was returned to the postmaster general of the prison’s mailroom.
The SNOD sent to the Cross City P.O. Box was returned “RETURN TO SENDER UNCLAIMED.” There are indications that the post office tried at least three times to have Mrs. Lander sign for the SNOD, but not to be outmaneuvered, she avoided the Post Office/Car Wash in Cross City until she assumed the coast was clear. What happened next is, perhaps, the most sublime irony I have yet come across in my career as a tax attorney.
The True Lander Saga, Part III: The Parable of the Mailman who Became the Right Hand of God
On the same day that the SNOD was mailed to Morgantown, November 16, Mr. Lander was packing his bags (well, at least his toothbrush and shank), because come tomorrow, he was going home. Home, for the rest of his sentence, was a minimum-security prison in Pensacola, Florida. Still, he was as close to being back in the Eden of Dixie County as he had been in what felt like a lifetime. Bring on the sunshine, moonshine, and skeeters, he thought to himself, as he nostalgically whistled Dixie and sharpened his shank on the cinderblock of the prison washroom.
Mr. Lander arrived in Pensacola on the afternoon of November 17. The NOD arrived in Morgantown the afternoon of November 22. Whether Mr. Lander had failed to leave a forwarding address with the concierge or bellman on his way out, or, more likely, the prison’s mail room attendant didn’t give a curly hair on a rat’s ass about former inmate’s mail. What is known from the Tax Court opinion, though, is that Mr. Lander never received his copy of the SNOD, as it was returned undeliverable to the IRS.
Sure, it could have been pure coincidence that the letter was mailed at the very moment when Mr. Lander was coming back to the sweet swamplands of his youth. But, if you believe in karma, kismet, or fate, could it be that the very same postal service that Mr. Lander was convicted of using to bilk little old women out of their life savings and that failed to deliver this solitary letter was, at that time, deputized as the right hand of a higher power? Live (and commit mail fraud) by the postal service, die (and suffer a glaring defeat in Tax Court) by the postal service.
(154 T.C. No. 7) Lander v. CommissionerAdd to favorites