United States Tax Court
160 T.C. No. 15
JOSEFA CASTILLO,
Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent
—————
Docket No. 18336-19L. Filed June 5, 2023.
—————
P late filed her Petition for review of a collection due
process (CDP) determination. R moved to dismiss the case
for lack of jurisdiction, arguing that the I.R.C. § 6330(d)(1)
30-day deadline to file a petition for review of a CDP
determination was jurisdictional. The Court granted that
Motion. P appealed the Order of Dismissal to the U.S.
Court of Appeals for the Second Circuit. The appeal was
held in abeyance pending the Supreme Court’s decision in
Boechler, P.C. v. Commissioner, 142 S. Ct. 1493 (2022).
The Supreme Court held that the I.R.C. § 6330(d)(1)
30-day deadline was nonjurisdictional. In the light of that
holding, the Second Circuit vacated this Court’s Order of
Dismissal and remanded the case for further consideration.
On remand R conceded the case in full. P moved for an
award of costs pursuant to I.R.C. § 7430. R opposed the
Motion, arguing that R was substantially justified in R’s
legal position that this Court lacked jurisdiction to hear the
matter at the time the Petition was filed.
Held: R was substantially justified in R’s legal
position that the Court lacked jurisdiction to hear the case
because at the time the Petition was filed, the caselaw was
clear that the I.R.C. § 6330(d)(1) 30-day deadline was
jurisdictional and not subject to equitable tolling. For that
Served 06/05/23
2
reason, P was not treated as the prevailing party for
purposes of I.R.C. § 7430. P’s Motion for Reasonable
Litigation Costs will be denied.
—————
Elizabeth A. Maresca, for petitioner.
Kevin R. Oveisi, Francesca M. Ugolini, Thomas A. Deamus, and Mimi
M. Wong, for respondent.
OPINION
KERRIGAN, Chief Judge: This case is before the Court on
petitioner’s Motion for Reasonable Litigation or Administrative Costs.
The U.S. Court of Appeals for the Second Circuit vacated this Court’s
Order of Dismissal in this case and remanded it for further proceedings
in the light of the Supreme’s Court decision in Boechler, P.C.
v. Commissioner, 142 S. Ct. 1493 (2022). Mandate, Castillo
v. Commissioner, No. 20-1635 (2d Cir. Sept. 23, 2022).
On remand respondent conceded the case in full. The issue
remaining for consideration is petitioner’s Motion in which she requests
administrative and litigation costs of $5,601 and $129,750, respectively,
pursuant to section 7430(a). 1 Respondent has conceded the
administrative costs. We will consider only whether petitioner is
entitled to litigation costs of $129,750.
Background
The following facts are derived from the parties’ pleadings and
Motion papers, including the Declarations and the Exhibits attached
thereto. Petitioner resided in New York when she filed her Petition.
On November 28, 2016, respondent issued petitioner a notice of
deficiency for 2014. The notice determined that petitioner had income
of $139,274 from payment card and third-party network transactions.
1 Unless otherwise indicated, all statutory references are to the Internal
Revenue Code, Title 26 U.S.C., in effect at all relevant times, all regulation references
are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant
times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
We round all monetary amounts to the nearest dollar.
3
Since petitioner reported $11,900, respondent determined that she had
unreported income of approximately $127,374 and a deficiency of
$44,427. Respondent also determined that petitioner was liable for a
section 6662(a) and (b)(2) accuracy-related penalty of $8,885 for an
underpayment attributable to a substantial understatement of income
tax.
The deficiency notice was mailed to petitioner’s last known
address. The United States Postal Service attempted delivery of the
notice once, but the correspondence was unclaimed and returned to
respondent. On April 17, 2017, respondent assessed the deficiency and
the penalty. On February 13, 2018, respondent issued petitioner a
Notice of Federal Tax Lien (NFTL) Filing and Your Right to a Hearing
Under Section 6320. On March 2, 2018, petitioner filed a request for a
collection due process (CDP) hearing.
At the CDP hearing, petitioner argued that she had not received
the deficiency notice and was not liable for the deficiency, interest, or
penalty. She argued that the income attributed to her in the deficiency
notice was instead attributable to Castillo Seafood, a business she
allegedly sold in 2009.
The settlement officer informed petitioner that because the notice
of deficiency was properly mailed but unclaimed, the underlying liability
could not be disputed unless petitioner could demonstrate that she was
out of the country during that time. Petitioner did not make that
showing but maintained that the determination was incorrect.
On December 11, 2018, respondent issued petitioner a notice of
determination for the 2014 taxable year, which sustained the filing of
the NFTL. It was mailed to petitioner’s last known address. The 30-
day period for filing a petition with the Tax Court expired on January
10, 2019. Petitioner filed her Petition on October 8, 2019. Respondent
stated in the Answer that “respondent intends on filing a motion to
dismiss for lack of jurisdiction.”
On January 6, 2020, respondent moved to dismiss petitioner’s
case for lack of jurisdiction on the ground that the Petition was not
timely filed. On March 25, 2020, we granted that Motion. On May 19,
2020, petitioner filed a Notice of Appeal with the Second Circuit. That
case was held in abeyance pending the Supreme Court’s decision in
Boechler.
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On April 21, 2022, the Supreme Court decided Boechler, holding
that the section 6330(d)(1) 30-day deadline to file a petition for review
of a CDP determination is nonjurisdictional and subject to equitable
tolling. Boechler, P.C. v. Commissioner, 142 S. Ct. at 1501. On August
2, 2022, the Second Circuit vacated the Tax Court’s Order of Dismissal
in this case and remanded it for further proceedings in accord with the
Supreme Court’s decision in Boechler. On November 8, 2022, the parties
filed a Stipulation of Settled Issues, stating that petitioner was not
liable for the unreported income, penalty, or interest determined in the
deficiency notice. On January 5, 2023, petitioner filed the Motion now
at issue.
Discussion
Section 7430(a) provides that the prevailing party may be
awarded reasonable administrative or litigation costs for any
proceedings brought by or against the United States in connection with
the determination, collection, or refund of any tax, interest, or penalty.
To recover costs, the taxpayer must establish that (1) the taxpayer is the
prevailing party, (2) he or she did not unreasonably protract the
proceedings, (3) the amount of the costs requested is reasonable, and (4)
he or she exhausted the administrative remedies available. Friends of
Benedictines in the Holy Land, Inc. v. Commissioner, 150 T.C. 107, 111–
12 (2018).
The section 7430 requirements are conjunctive, and the failure to
satisfy any one of them will preclude an award of costs. See Minahan
v. Commissioner, 88 T.C. 492, 497 (1987). As the moving party,
petitioner has the burden of proving that she satisfies each requirement
of section 7430. See Rule 232(e). The fact that respondent ultimately
conceded the case in full is not determinative as to whether petitioner is
entitled to an award of reasonable litigation costs. See Sokol v.
Commissioner, 92 T.C. 760, 767 (1989).
Respondent conceded that petitioner has satisfied three of the
section 7430 requirements: She did not unreasonably protract the
proceedings, the amount of the costs requested is reasonable, and she
exhausted the administrative remedies available. The parties disagree
as to whether petitioner should be treated as the prevailing party.
To be the prevailing party, petitioner must have substantially
prevailed with respect to the amount in controversy or have
substantially prevailed with respect to the most significant issue or set
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of issues presented. See § 7430(c)(4)(A)(i). The parties filed a
Stipulation of Settled Issues agreeing that the notice of determination
is not sustained, and petitioner is not liable for the deficiency, interest,
or penalty determined in the deficiency notice. Petitioner has prevailed
with respect to the amount in controversy.
The parties dispute the “most significant issue” on which
petitioner prevailed. See § 7430(c)(4)(A)(i)(II). Since petitioner was the
prevailing party as to the amount in controversy, we do not need to
decide this issue. Instead we must consider the exception provided in
section 7430(c)(4)(B). A party is not treated as the prevailing party if
the United States establishes that its position was “substantially
justified.” § 7430(c)(4)(B)(i). Respondent contends that the exception is
applicable here.
Respondent bears the burden of showing that respondent’s
position was substantially justified. See § 7430(c)(4)(B)(i); Rule 232(e).
Generally, the Government’s position is substantially justified when its
position is based on supportable interpretations of federal tax statutes
and caselaw. TKB Int’l, Inc. v. United States, 995 F.2d 1460, 1468 (9th
Cir. 1993). The litigation position of the United States is generally
established at the time the Government files its answer in the judicial
proceeding. See § 7430(c)(7)(A); Huffman v. Commissioner, 978 F.2d
1139, 1148 (9th Cir. 1992), aff’g in part, rev’g in part, and remanding
T.C. Memo. 1991-144; Maggie Mgmt. Co. v. Commissioner, 108 T.C. 430,
442 (1997). To be substantially justified respondent’s position must
have a reasonable basis in both fact and law. See Pierce v. Underwood,
487 U.S. 552, 565 (1988).
Respondent’s litigation position—which was first raised in the
Answer—was that the Court lacked jurisdiction because the Petition
was not timely filed. There is no dispute that the Petition was filed late.
Respondent argues that because the law was clear then that a timely
filing was necessary to establish the Court’s jurisdiction, the
Commissioner was substantially justified in asserting that the Court
lacked jurisdiction. We agree with respondent.
The notice of determination was mailed by certified mail in
accordance with Treasury Regulation § 301.6330-1(e)(3) Q&A-E8 and
sufficient to start the 30-day period for appeal under section 6330(d).
See Weber v. Commissioner, 122 T.C. 258, 261–62 (2004). Until the
Supreme Court’s recent decision in Boechler, it was well established that
the 30-day period to file a petition for review of a collection due process
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determination was jurisdictional. See Kaplan v. Commissioner, 552 F.
App’x 77, 78 (2d Cir. 2014); Guralnik v. Commissioner, 146 T.C. 230,
235–36 (2016).
Before the Supreme Court’s decision in Boechler neither the Tax
Court nor the federal courts of appeals had held the 30-day period in
section 6330(d)(1) to be nonjurisdictional. Because Boechler was a
matter of first impression for the Supreme Court, respondent’s position
was substantially justified. See Bontrager v. Commissioner, T.C. Memo.
2019-45, at *6 (“The Commissioner generally is not subject to an award
of litigation costs under section 7430 where the underlying issue is one
of first impression.” (quoting Rowe v. Commissioner, T.C. Memo. 2002-
136, 2002 WL 1150776, at *11)). Petitioner then should not be treated
as the prevailing party.
Petitioner argues that respondent’s position should be presumed
not to be substantially justified because respondent did not follow
guidance provided in the Internal Revenue Manual (IRM). See
§ 7430(c)(4)(B)(ii). The presumption in section 7430(c)(4)(B)(ii) does not
arise here because the IRM is not “applicable published guidance”
within the meaning of the statute. Section 7430(c)(4)(B)(iv) defines
“applicable published guidance” exhaustively as “regulations, revenue
rulings, revenue procedures, information releases, notices, and
announcements, and . . . any of the following which are issued to the
taxpayer: private letter rulings, technical advice memoranda, and
determination letters.” Since the IRM is not included in this list, the
presumption does not arise.
We conclude that petitioner is not entitled to an award of
litigation costs. We have considered all of petitioner’s arguments, and
to the extent not discussed above, we find them to be irrelevant, moot,
or without merit.
To reflect the foregoing,
An appropriate order will be entered.