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Ramey v. Commissioner (156 T.C. No. 1)

On January 14, 2021, the Tax Court issued its opinion in Ramey v. Commissioner, 156 T.C. No. 1. The underlying issue presented in Ramey was whether notice sent to last known address, shared by multiple businesses, and not left with anyone authorized to receive the petitioner’s mail, started the CDP Appeal clock in IRC § 6330(a)(2) and (3).

Legal Background

The IRS may not make a levy unless the IRS notifies the taxpayer in writing of the right to a hearing before the levy is made. IRC § 6330(a); IRC § 6330(b). The IRS must provide the required notice not less than 30 days before the day of the first levy. IRC § 6330(a)(2). The Code enumerates three acceptable ways of providing the notice. The notice may be (A) given in person; (B) left at the dwelling or usual place of business of such person; or (C) sent by certified or registered mail, return receipt requested, to such person’s last known address.  Id. The taxpayer, in turn, must request the hearing during the 30-day period set out in the statute. IRC § 6330(a)(2), (3)(B).

Tax Court Frames the Issue

Noting that this was a question of first impression for the Tax Court, the court frames the issue as whether a notice of intent to levy that is sent to a taxpayer’s actual (and last known) address by United States Postal Service (“USPS”) certified mail, return receipt requested, starts the running of the 30-day period for requesting a hearing under IRC § 6330, even though the taxpayer does not personally receive the notice because the taxpayer’s address is shared by multiple businesses and the USPS letter carrier leaves the notice at that address with someone who neither works for the taxpayer nor is authorized to receive mail on the taxpayer’s behalf.

Joel the Letter-Signing Street Urchin

The IRS sent a LT11 (Notice of Intent to Levy) to the petitioner on July 13, 2018. The letter informed the petitioner of his right to a CDP hearing. The petitioner was an attorney, and the IRS had his office address as his “last known address.” Although the IRS sent the letter by certified mail, it was signed for by some bozo named Joel, who very well could have been a street urchin for all we know. If he was, Joel was an honest albeit inefficient urchin, as the letter eventually “wound up on his desk” shortly before the closure of the 30-day period.  The petitioner maintained that Joel was neither his employee nor was he authorized to receive mail on the petitioner’s behalf, and the court accepted these assertions for purposes of the opinion.[1]

Because the LT11 was sent on July 13, the 30-day window under IRC § 6330(a) closed on August 12, 2018. Nonetheless, the petitioner submitted a Form 121532 the IRS requesting a CDP hearing bearing a postmark of August 20, 2018. The IRS provided the petitioner with an administrative equivalent hearing because of the lateness of the CDP request. Because the hearing was not an actual CDP hearing, the IRS issued a “decision letter” instead of a “determination letter.” Critically, IRC § 6330 does not authorize a taxpayer to appeal the decision of Appeals with respect to an equivalent hearing.  Treas. Reg. § 301.6330-1(i)(2); Q&A-16.

Regulatory Methods of Delivery

Treas. Reg. § 301.6330-1(a)(3), Q&A-A8(i) states that the IRS may effect delivery of a pre-levy CDP notice in one of three ways: (a) by delivering the notice personally to the taxpayer; (b) by leaving the notice at the taxpayer’s dwelling or usual place of business; or (c) by mailing the notice to the taxpayer the taxpayer’s last known address by certified or registered mail return receipt requested.  Further, the regulations explain that notification properly sent to the taxpayer’s last known address or left at the taxpayer’s dwelling or usual place of business is sufficient to start the 30-day period within which the taxpayer may request a CDP hearing. Actual receipt is not a prerequisite to the validity of the CDP Notice. Id. at Q&A-A9.

No Determination Letter, No Jurisdiction

The Tax Court has consistently held that its jurisdiction under IRC § 6330(d)(1) depends on (1) the issuance of a valid notice of determination and (2) a timely filed petition. Offiler v. Commissioner, 114 T.C. 492, 498 (2000); see also Wilson v. Commissioner, 131 T.C. 47, 50 (2008); Andre v. Commissioner, 127 T.C. 68, 69-70 (2006); Lunsford v. Commissioner, 117 T.C. 159, 161 (2001). When a taxpayer fails to make a timely request for a hearing under IRC § 6330 and Appeals makes no determination pursuant to IRC § 6330, the Tax Court has no jurisdiction under IRC § 6330(d) because there is no Appeals determination for the Tax Court to review. Offiler, 114 T.C. at 498; see also Moorhous v. Commissioner, 116 T.C. 263, 269-270 (2001); Kennedy v. Commissioner, 116 T.C. 255, 261-263 (2001).

A Decision Letter is Never a Determination Letter…Unless It Is

Although the Tax Court was fairly adamant that a determination letter was a prerequisite the jurisdiction, it backed off a little bit from this bright line rule…but not far enough for the petitioner. The court noted that a decision letter issued after an equivalent hearing generally is not considered a determination. However, a decision letter issued after a timely request for hearing under IRC § 6330 is a determination for purposes of IRC § 6330(d)(1), regardless of the label IRS places on the document. Craig v. Commissioner, 119 T.C. 252, 259 (2002); see also Andre, 127 T.C. at 70. Thus, if Appeals erred in concluding that a taxpayer’s request for a CDP hearing was untimely, the Tax Court has the jurisdiction to correct the error and to review Appeals’ decision as a determination.

Tax Court Says It’s More Important to Send than to Receive

The IRS specifically states that notice may be given to the petitioner through sending the notice of intent to levy by certified mail to the taxpayer’s last known address. The Tax Court observes that this method focuses on the sending by the IRS, not receipt by the taxpayer. The onus is on the IRS to properly address, post, and mail the notice.  After that, the IRS washes its giant administrative hands of the notice and puts the ball squarely in the taxpayer’s court.

You Made Your (Communal) Bed, Now Sleep in It

The petitioner argued that because multiple people use the address, mail might be accepted by the wrong person, a-la Joel, the street urchin with a troubled past. Even if that was the case (it was), the Tax Court observes that the petitioner “does not explain how the IRS could have taken that fact into account.”  The court states that the petitioner was free to organize his business affairs as he saw appropriate, but, having made such a choice (in this case to share in address with other businesses), and having given the IRS such an address (which strikes me as a bit too communal for my East Coast comfort zone), the petitioner could not now “properly complained” when the IRS used that very address to reach him.

Takeaways

The petitioner is foisted by a regulation, in the end.  “Actual receipt is not a prerequisite to the validity of the CDP notice.” Treas. Reg. § 301.6330-1(a)(3), Q&A-A9. This has always seemed to me a rather harsh result, but you can’t fault the Tax Court for being consistent.

The facts of Ramey are not ideal for the petitioner.  Ultimately, he did receive the notice, but what if Joel had absconded with the notice and was discovered with years of unknown IRS correspondence in his possession?  Doesn’t the USPS bear any responsibility to ensure that the mail reach its destination?  I mean, the very purpose of a certified or registered letter is to ensure that someone, who is authorized to sign for the letter, actually signs for the letter.

Admittedly, I have never litigated this precise issue.  I might emphasize the requirement of IRC § 6030(a)(2) that the notice must be sent by certified or registered mail, return receipt requested.  Why would Congress have cared that the notice be sent requiring a return receipt if it did not care that delivery mattered, too?

Footnote on Joel the Urchin:

Could have been a contender[1] Joel, it turns out, was an employee of the San Simeon Lodge, which shares the address with the petitioner’s firm.  Still, he probably had a rough childhood at least…alcoholic mother, emotionally distant father…dropped out of college to pursue his sculptures but, heretofore, has not found a shred of success…you know, that kind of stuff.

(156 T.C. No. 1) Ramey v. Commissioner

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