TERRELL v. Comm'r of INTERNAL REVENUE

• Decision Date: 01 November 2010
• Docket Number: No. 09-60822.,09-60822.
• Citation: 625 F.3d 254
• Parties: Pamela R. TERRELL, Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

625 F.3d 254

Pamela R. TERRELL, Petitioner-Appellant,

v.COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.

No. 09-60822.

United States Court of Appeals,Fifth Circuit.

Nov. 1, 2010.

COPYRIGHT MATERIAL OMITTED.

Appeal from the Decision of the United States Tax Court.

Juan F. Vasquez, Jaime Vasquez (argued), Chamberlain, Hrdlicka, White, Williams & Martin, Peter Andrew Lowy (argued), Shell Oil Co., Houston, TX, for Terrell.

Damon W. Taaffe (argued), John DiCicco, Michael J. Haungs, U.S. Dept. of Justice, Tax Div., App. Section, Clarissa C. Potter, IRS, Washington, DC, for CIR.

Carlton M. Smith, Benjamin N. Cardozo School of Law, New York City, pro se, Amicus Curiae.

Before STEWART, PRADO and ELROD, Circuit Judges.

PRADO, Circuit Judge:

Pamela R. Terrell appeals the Tax Court's order dismissing her petition for lack of jurisdiction. The Tax Court found it lacked jurisdiction because Terrell filed her petition more than ninety days after the Commissioner of Internal Revenue (“Commissioner”) sent her a Notice of Final Determination (“Notice”). Terrell argues that because the Commissioner did not send the Notice to her “last known address,” as required by I.R.C. § 6015(e), this Court should find her petition timely as it was filed within ninety days of the Internal Revenue Service (“IRS”) mailing the Notice to her correct address.

The IRS was on notice that its address on file for Terrell was incorrect, because the United States Postal Service (“USPS”) had already returned three of the IRS's prior mailings to Terrell as undeliverable. The IRS thus had a duty to exercise reasonable diligence to search for her correct address, but failed to do so before sending the Notice. The Notice sent on April 6, 2007 was, therefore, not sent to her “last known address,” and became null and void when it was subsequently returned as undeliverable. Terrell's ninety days began to run only after the IRS re-sent the Notice to her correct address on May 14, 2007. Because Terrell filed her petition with the Tax Court within ninety days of the May 14th Notice, her petition was timely. Accordingly, we REVERSE the ruling of the Tax Court and REMAND for a determination of the petition's merits.

I. FACTUAL AND PROCEDURAL BACKGROUND

After receiving an assessment for over $660,000 in unpaid taxes, Terrell filed a Request for Innocent Spouse Relief (Form 8857) dated September 20, 2006 with the IRS. She listed her then-current address on her Request (the “North Richland Hills address”). Soon after filing the Form 8857, she moved to a new address (the “Dallas address”). Terrell claims that she submitted a Change of Address form to the USPS, but the record contains no evidence of this apart from Terrell's declaration.

On December 13, 2006, the IRS mailed a confirmation of receipt of Form 8857 to the North Richland Hills address, but USPS returned the letter to the IRS as undeliverable on January 24, 2007. On February 7, 2007, the IRS mailed two preliminary notices of determination denying relief. The preliminary notices informed Terrell that she had thirty days to request a review of the determination from IRS Appeals. On February 28, 2007, USPS returned the preliminary notices to the IRS as undeliverable.

After the IRS did not receive a request to review the determination from Terrell, it mailed the Notice on April 6, 2007, to the North Richland Hills address, denying § 6015 relief and stating that Terrell had ninety days to petition the Tax Court for review. On April 11, 2007, Terrell filed her 2006 tax return, listing the Dallas address as her current address. On May 7, 2007, the Notice was returned to the IRS as undeliverable. After receiving the returned Notice, the IRS searched its database, found the Dallas address, and re-mailed the Notice to that address on May 14, 2007. The Notice the IRS sent to the Dallas address was identical to the one sent on April 6, 2007, and also listed April 6, 2007 as the date of determination of Terrell's claim. Terrell admits that she received the Notice in mid-May. Terrell filed a petition with the Tax Court on July 13, 2007.

The Commissioner moved to dismiss the petition for lack of jurisdiction because Terrell had not filed it within ninety days after April 6, 2007. Terrell responded that the ninety-day limit began to run only in mid-May when she actually received the Notice, or, in the alternative, that the Tax Court should exercise its equitable power to allow her petition. After a hearing, the Tax Court dismissed Terrell's petition for lack of jurisdiction.

The Tax Court found that, as a court of limited jurisdiction lacking general equitable powers, it was barred from hearing Terrell's claim because her petition fell outside the ninety-day limit of § 6015(e). It held that Terrell had not carried her burden of demonstrating that the Notice was not sent to her “last known address.” The Tax Court found that the IRS acted with reasonable diligence to ascertain her “last known address,” because, after the USPS returned the first Notice, the IRS searched its database, found Terrell's current address, and re-sent a copy of the Notice. The Tax Court therefore found that Terrell had to file her petition by July 5, 2007, and because she did not file the petition until July 13, 2007, it lacked jurisdiction. Terrell timely filed this appeal.

II. JURISDICTION AND STANDARD OF REVIEW

This Court has jurisdiction to review final decisions of the Tax Court under 26 U.S.C. § 7482(a)(1).

[1] [2] [3] This Court “appl[ies] the same standard of review to decisions of the Tax Court that [it] appl[ies] to district court decisions.” Green v. Comm'r, 507 F.3d 857, 866 (5th Cir.2007) (citing Arevalo v. Comm'r, 469 F.3d 436, 438 (5th Cir.2006)). “Findings of fact are reviewed for clear error and issues of law are reviewed de novo.” Id. (citing Arevalo, 469 F.3d at 438). “Clear error exists when this [C]ourt is left with the definite and firm conviction that a mistake has been made.” Id. (citing Streber v. Comm'r, 138 F.3d 216, 219 (5th Cir.1998)).

III. DISCUSSION

Terrell argues that the IRS did not mail the Notice to her “last known address,” because the IRS failed to conduct a “reasonably diligent” search for her address before mailing the Notice. She asserts that her ninety-day petition period did not begin until she received the re-sent Notice, making her petition timely and giving the Tax Court jurisdiction. ¹

Our inquiry into these claims proceeds in two parts. First, we must determine whether the IRS failed to exercise “reasonable diligence” in locating Terrell's correct address and thereby failed to send the Notice to her “last known address” as required by § 6015(e). Second, if we find that the IRS failed to exercise “reasonable diligence” and the Notice was therefore not sent to her “last known address,” we must determine the date on which Terrell's petition period started in order to assess whether the Tax Court had jurisdiction over her petition.

A. Validity of the April 6, 2007 Notice

[4] An individual who requests Innocent Spouse Relief “may petition the Tax Court (and the Tax Court shall have jurisdiction) to determine the appropriate relief available ... not later than the close of the 90th day after” the date the IRS “mails, by certified or registered mail to the taxpayer's last known address, notice of the Secretary's final determination of relief available to the individual.” I.R.C. § 6015(e)(1)(A). Although there is a dearth of cases interpreting § 6015, the Tax Court and the parties correctly cite to analogous cases from IRC §§ 6212 and 6213 concerning the IRS sending tax deficiency notices. ² See Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469, 479, 112 S.Ct. 2589, 120 L.Ed.2d 379 (1992) ( “[I]dentical terms within an Act bear the same meaning.”). In both § 6015 and § 6213, the Tax Court has no jurisdiction over a taxpayer's petition if it is not filed before the deadline.

[5] [6] [7] In order to have jurisdiction to hear a taxpayer's petition, § 6015(e) requires that the taxpayer request review within ninety days of the IRS sending notice to the taxpayer's “last known address.” I.R.C. § 6015(e)(1)(A). The Tax Court's jurisdiction is a question of law that we review de novo. Ferguson v. Comm'r, 568 F.3d 498, 502 (5th Cir.2009). However, whether the IRS properly sent notice to the taxpayer's “last known address,” thereby starting the ninety-day response period, is a question of fact that we review for clear error. Ward v. Comm'r, 907 F.2d 517, 521 (5th Cir.1990).

[8] [9] [10] “ ‘[L]ast known address' is a term of art and refers to that address which, in light of all relevant circumstances, the IRS reasonably may consider to be the address of the taxpayer at the time the notice of deficiency is mailed.” Mulder v. Comm'r, 855 F.2d 208, 211 (5th Cir.1988) (emphasis added) (citing Brown v. Comm'r, 78 T.C. 215, 218, 1982 WL 11188 (1982)). This Court has interpreted Mulder as standing for the rule that “absent a subsequent, clear and concise notification of an address change, the IRS is entitled to consider the address on the taxpayer's most recently filed return as the taxpayer's ‘last known address.’ ” Pomeroy v. United States, 864 F.2d 1191, 1194 (5th Cir.1989) (citations omitted). This rule, however, does not dispense with the requirement that the IRS must use “reasonable diligence” to determine the taxpayer's address in light of all relevant circumstances. When the IRS knows or should know at the time of mailing that the taxpayer's address on file may no longer be valid because of previously returned letters, “reasonable diligence” requires further investigation. See Mulder, 855 F.2d at 212 (finding no “due diligence” where “two letters posted shortly before the notice ... were returned undelivered” and the notice itself was neither delivered nor returned); see also Pomeroy, 864 F.2d at 1195 (“Given that the two returned letters put the IRS on notice that the...