ORGANIC CANNABIS FOUNDATION, LLC, DBA Organicann Health Center v. COMMISSIONER OF INTERNAL REVENUE; NORTHERN CALIFORNIA SMALL BUSINESS ASSISTANTS, INC. v. COMMISSIONER OF INTERNAL REVENUE
No. 17-72874, No. 17-72877
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
June 18, 2020
Tax Ct. No. 10593-15; Tax Ct. No. 10594-15; Argued and Submitted October 22, 2019 San Francisco, California
Opinion by Judge Collins
OPINION
Filed June 18, 2020
Before: Jay S. Bybee, N. Randy Smith, and Daniel P. Collins, Circuit Judges.
Opinion by Judge Collins
SUMMARY*
Tax
The panel affirmed the Tax Court‘s dismissal, for lack of jurisdiction, of untimely petitions for redetermination of federal income tax deficiencies.
Taxpayers operate marijuana dispensaries. In response to notices of deficiencies from the Internal Revenue Service, taxpayers sought to file their petitions for redetermination by April 22, 2015, the last day to file such petitions under
The panel first rejected the contention that the petitions were timely because the Tax Court was inaccessible on the filing dеadline. The panel held that, for non-electronic filings, a clerk‘s office is “inaccessible” on the “last day” of a filing period only if the office cannot practicably be accessed for delivery of documents during a sufficient period of time up to and including the point at which “the clerk‘s*
office is scheduled to close.” The panel explained that here, taxpayers presented no evidence to show that the Tax Court Clerk‘s Office could not be accessed during the substantial remaining portion of the day after FedEx unsuccessfully attempted delivery of the petitions earlier in the day on April 22, 2015.
The panel next held that the petitions could not be deemed timely under the mailbox rule set forth in
The panel also held that because
Finally, the panel rejected Organic Cannabis Foundation‘s contention that its notice of deficiency was invalid because it was improperly addressed and that the error was not harmless, because the panel disagreed with the premise that the notice was misaddressed.
COUNSEL
Matthew D. Carlson (argued) and Douglas L. Youmans, Wagner Kirkman Blaine Klomparens & Youmans, Mather, California, for Petitioners-Appellants.
Paul Andrew Allulis (argued), Francesca Ugolini, and Patrick J. Urda, Attorneys; Richard E. Zuckerman, Principal Deputy Assistant Attorney General; Tax Division, United States Department of Justice, Washington, D.C.; for Respondent-Appellee.
Carlton M. Smith, New York, New York; Professor T. Keith Fogg, Director, Federal Tax Clinic of the Legаl Services Center of Harvard Law School, Jamaica
OPINION
COLLINS, Circuit Judge:
This unhappy case presents a cautionary tale about the need for lawyers to ensure that they have done exactly what is statutorily required to invoke a court‘s jurisdiction. The unusual Internal Revenue Code (“I.R.C.“) provision at issue here allows taxpayers to benefit from a “mailbox” rule—i.e., that a document will be deemed filed when dispatched—only if the taxpayer uses one of the particular delivery services that the Internal Revenue Service (“IRS“) has specifically designated for that purpose in a published notice. In preparing two Tax Court petitions for filing, the attorneys here delegated the task of arranging delivery to a secretary who, unfortunately, selected an overnight delivery service that was not then on the published list (it was added two weeks later). The error would not have mattered if the petitions had nonetheless arrived the next day, but as it turned out, they were not received by the Tax Court until two days after being dropped off at a FedEx office in California. Because the Tax Court concluded that the petitions had not been timely received and that the mailbox rule did not apply, it dismissed the petitions for lack of jurisdiction. Finding no error, we affirm.
I
These appeals involve a challenge to income-tax deficiencies issued against two corporations, owned and controlled by a woman named Dona Ruth Frank, that planned or operated four California medical marijuana dispensariеs. Appellant Organic Cannabis Foundation, LLC (“Organic Cannabis“) began operating a marijuana dispensary in Santa Rosa in 2006. Appellant Northern California Small Business Assistants, Inc. (“NCSBA“) held a 99% ownership interest in the Oakland Cannabis Institute, LLC and in The Petting Zoo, LLC, which respectively opened marijuana dispensaries in 2008 in Oakland and San Diego.1 NCSBA also had a comparable interest in Napa Organics, LLC, which was planning to open a dispensary in Napa in 2010. However, according to NCSBA‘s petition in the Tax Court, “the dispensary never opened at the designated location and Napa Organics ceased operations in 2011.”
A
On January 22, 2015, the IRS issued notices of deficiency to both Appellants for tax years 2010 and 2011. The notices stated that, by “operat[ing] a medical marijuana dispensary,” Organic Cannabis and the three NCSBA-owned LLCs were subject to
consists [of] trafficking in controlled substance[s].”2 After making these disallowances, the IRS‘s notice to
The two IRS notices were separately sent by certified mail from the IRS‘s San Francisco office on January 22, 2015 for delivery to the same Post Office (“P.O.“) Box in Santa Rosa (which was used by Dona Frank).3 According to the certified mail tracking records, the Organic Cannabis notice arrived at the Santa Rosa pоst office for pickup on January 24, and the NCSBA notice arrived on January 28. Both items were retrieved at the same time on February 3.
Each notice stated on the cover page that the last day to file a petition for redetermination with the Tax Court was April 22, 2015.
B
Using the same law firm in Mather, California, a suburb of Sacramento, Organic Cannabis and NCSBA prepared their respective Tax Court petitions, in which they challenged both the applicability and the constitutionality of
As the petitions were being finalized on the late afternoon of April 21—the day before they were due—one of the firm‘s attorneys asked a secretary to prepare a FedEx shipping envelope addressed for overnight delivery to the Tax Court in Washington, D.C. After logging into her account on the FedEx website, the secretary entered the necessary addressing information and then reviewed the delivery options. She selected the “FedEx ‘First Overnight‘” delivery option because, “given the attorneys’ obvious concerns about meeting the filing deadlines, [she] felt [she] should select the delivery method that would guarantee the earliest possible delivery.” After preparing the appropriately labeled FedEx package, the secretary gave it to one of the attorneys and went home. A paper receipt from the FedEx office in nearby Rancho Cordova states that the single package (which contained both Appellants’ petitions) was dropped off at 8:04 P.M. Pacific time on April 21.
The original FedEx label prepared by the secretary stated that the shipping date was “21APR15” and that the package was to be delivered “WED – 22 APR 8:30A” by “FIRST OVERNIGHT.” At some point in processing the package, however, FedEx apparently prepared a new label that bears a notation indicating it was created on “04/22” and that
redesignates the package for delivery on “THU – 23 APR 8:30A” by “FIRST OVERNIGHT.” This new label was affixed directly over the prior label, and the package arrived in that form at the Tax Court on the morning of April 23. The limited FedEx tracking information that was later available concerning the package no longer listed any of the details of the package‘s transit while being handled by FedEx; instead, it merely stated that the “Ship date” was “Wed 4/22/2015” and that the package was delivered at “7:35 am” on “4/23/2015 – Thursday.”
On the morning of April 22 (the due date for the petitions), one of the attorneys asked the secretary who had prepared the FedEx packаge to check on its status. The secretary checked her email and saw that she had not received the usual automatic notice from FedEx confirming its delivery. She called the Tax Court Clerk‘s Office
C
On July 29, 2016—more than 15 months after the petitions had been docketed in the Tax Court—the Commissioner filed motions to dismiss both petitions for lack of jurisdiction, arguing that they were received by the Tax Court one day beyond the 90-day time limit set forth in
Appellants opposed the respective motions to dismiss, arguing that the petitions should be deemed timely because (1) delivery had been attempted on April 22, but the Tax Court was inaccessible; and (2) Appellants’ use of FedEx First Overnight should be deemed to satisfy
Cannabis filed its own “motion to dismiss for lack of jurisdiction,” arguing that, in the event that its petition was deemed untimely, the improperly addressed deficiency notice was invalid and no proceedings could be had based on it. Cf. Napoliello v. Comm‘r, 655 F.3d 1060, 1063 (9th Cir. 2011) (“A determination that the Tax Court lacks jurisdiction because of an invalid notice strips the IRS of power to assess taxes based on that notice.“).
On July 25, 2017, the Tax Court granted the Commissioner‘s motions to dismiss, concluding that the petitions were not filed within the 90-day time period established in
II
In dismissing the petitions for lack of jurisdiction, the Tax Court here did not purport to makе any findings of fact but instead took “the facts as pleaded in the petition[s] as true for purposes” of the motions. Reviewing de novo the Tax Court‘s dismissals, Duggan v. Comm‘r, 879 F.3d 1029, 1031 (9th Cir. 2018), we conclude that the Tax Court correctly found the petitions to be untimely.
A
Appellants first argue that their petitions were timely filed because the Tax Court was inaccessible on April 22, thereby extending the due date for filing to the next day. The Tax Court correctly rejected this argument.
Under
Petitions would be timely if the Tax Court‘s Clerk‘s Office was “inaccessible” on April 22, 2015 within the meaning of that rule.
the Tax Court, that a FedEx delivery person did unsuccessfully attempt delivery of the package on the morning of April 22, we agree that Appellants failed to show inaccessibility within the meaning of
Taking the secretary‘s statement at face value, she was informed by FedEx at some point in the mid- to late-morning Pacific time that FedEx had attempted to deliver the package earlier that day, but was unsuccessful due to “some plausible reason like construction” or a “police action (perhaps the representative said the access was blocked off because of a safety threat).” But that says nothing about whether the Tax Court‘s Clerk‘s Office could have been reached later, during the remainder of the business day. As the Tax Court noted, the nature of the obstacle that FedEx claimed to have encountered was not one that, like “inclement weather, government closings, or other reasons,” would be expected to make it impracticable to reach the clerk‘s office for the “entire day.” Nor did Appellants suggest that the clerk‘s office was officially closed on April 22; indeed, the Tax Court took judicial notice that “the Court‘s Clerk‘s Office was open during its normal business hours” thаt day. A temporary obstacle that is encountered earlier in the day does not, without more, render the clerk‘s office “inaccessible” on “the last day for filing.”
attempt to deliver the package. Cf. Justice v. Town of Cicero, 682 F.3d 662, 664 (7th Cir. 2012) (suggesting, in dicta, that if a court‘s e-filing system crashed during the last hour of the day, the clerk‘s office would be “inaccessible” under
Our cоnclusion is strongly supported by the Eleventh Circuit‘s decision in Chao Lin, which adopted the same construction of
We therefore hold that, for non-electronic filings (such as those at issue here), a clerk‘s office is “inaccessible” on the “last day” of a filing period only if the office cannot practicably be accessed for delivery of documents during a sufficient period of time up to and including the point at
which “the clerk‘s office is scheduled to close.”
B
Appellants alternatively argue that their petitions should be deemed timely under the mailbox rule set forth in
Section 7502(a) of the I.R.C. states that, if any “document required to be filed . . . within a prescribed period . . . under authority of any provision of the internal revenue laws” is received by the relevant “agency, officer, or office” after that prescribed period “by United States mail,” then “the date of the United States postmark stamped on the cover in which such . . . document . . . is mailed shall be deemed to be the date of delivery.”
specifications set forth in the statute. Id. The Tax Court concluded that Appellants could not avail themselves of this mailbox rule because the particular delivery service used here did not fall within the statutory definition of a “designated delivery service.” We agree.
Unlike
The year after
1997-1 C.B. 644, 645. This document also made clear that private couriers seeking designation under
Appellants contend that “FedEx First Overnight” should be deemed to be essentially the same delivery service as “FedEx Priority Overnight” and “FedEx Standard Overnight,” and that therefore the service Appellants used here is actually covered by the then-existing designations in Notice 2004-83. Alternatively, Appellants argue that, because FedEx First Overnight was indisputably eligible for
designation on the day they used it, and was formally designated just two weeks later, Appellants should be deemed to have substantially complied with
Congress did not merely require that a private delivery service meet certain functional criteria concerning the operation of that delivery service; it also pointedly insisted that the service must be “designаted by the Secretary for purposes of this section.”
service should be deemed to substantially comply with the statute.
Because the particular service Appellants used here was not on the IRS‘s formal list of designated delivery sеrvices, the Tax Court correctly held that
III
Appellants argue that, even if the petitions were untimely,
As Appellants acknowledge, controlling Ninth Circuit precedent holds that
In a series of recent cases, the Supreme Court has tried “‘to bring some discipline to the use’ of the term ‘jurisdiction.‘” Sebelius v. Auburn Reg‘l Med. Ctr., 568 U.S. 145, 153 (2013) (quoting Henderson v. Shinseki, 562 U.S. 428, 435 (2011)). Given that labeling a statutory requirement as jurisdictional produces “harsh consequences“—such as the obligation to enforce it sua sponte, or upon a party‘s belated objection, and to do so without regard to equitable considerations—the Court has clarified that “procedural rules, including time bars, cabin a court‘s power only if Congress has clearly stated аs much.” United States v. Kwai Fun Wong, 575 U.S. 402, 409 (2015) (cleaned up). This clear statement rule does not require that Congress “incant magic words in order to speak clearly,” and so the absence of the word “jurisdiction” is not necessarily dispositive. Auburn Reg‘l, 568 U.S. at 153. “But traditional tools of statutory construction must plainly show that Congress imbued a procedural bar with jurisdictional consequences.” Kwai Fun Wong, 575 U.S. at 410. “Congress must do something special, beyond setting an exception-free deadline,” in order to create a jurisdictional requirement, and that remains true “even when the time limit is important (most are) and even when it is framed in mandatory terms (again, most are).” Id. Considering the “‘text, context, and relevant historical treatment’ of the provision at issue,” Musacchio v. United States, 136 S. Ct. 709, 717 (2016) (quoting Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 166 (2010)), we conclude that Congress has indeed done “something special” to “plainly show” that
First,
Appellants contend that this language in
This reading of
period but would then revive if the Tax Court subsequently decides to accept a late-filed petition. Nothing in the statute suggests that such a discontinuity was contemplated; on the contrary, the three successive “until” clauses in the relevant sentence of
between the taxpayer and the IRS, see Malat v. Comm‘r, 302 F.2d 700, 706 (9th Cir. 1962). However, there is no such “decision” as to “amount,” and no preclusive effect, if the Tax Court‘s “dismissal is for lack of jurisdiction.”
Third, the “‘historical treatment’ of the provision at issue,” Musacchio, 136 S. Ct. at 717, further confirms that
of Supreme Court decisions left undisturbed by Congress attached a jurisdictional label to the prescription.” (cleaned up)). On the contrary, by adding in 1988 the above-discussed language about Tax Court “jurisdiction” to enjoin collection during the temporary prohibition period, see Pub. L. No. 100-647, § 6243(a), 102 Stat. 3342, 3749 (1988), Congress has confirmed the pre-existing jurisdictional understanding of
Accordingly, we agree with the Tax Court‘s conclusion that the untimeliness of the petitions deprived it of jurisdiction to redetermine the deficiencies asserted against Appellants.
IV
Lastly, we reject Organic Cannabis‘s contention that we should declare invalid the tax deficiency notice sent to it—a ruling that would separately defeat the Tax Court‘s jurisdiction but that would do so in a way that assertedly “strips the IRS of power to assess taxes based on that notice.” Napoliello, 655 F.3d at 1063. Organic Cannabis contends that the notice was invalid because it was improperly addressed
For purposes of sending a notice of deficiency to a taxpayer, it is generally “sufficient” if the IRS mails the notice to the taxpayer‘s “last known address.”
We take judicial notice of the fact that the U.S. Postal Service has reserved the five-digit ZIP code “95402” solely for P.O. Boxes in Santa Rosa.8 See Dudum v. Arntz, 640 F.3d 1098, 1101 n.6 (9th Cir. 2011) (judicial notice may be taken of official information that is posted on a government website and that is “‘not subject to reasonable dispute‘” (quoting
Postal Service in the address it used, which was therefore sufficient. As a rеsult, there is no basis for declaring Organic Cannabis‘s notice of deficiency to be invalid.
* * *
We affirm the Tax Court‘s dismissal of Appellants’ petitions for lack of jurisdiction.
AFFIRMED.
Notes
No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.
Except as otherwise provided in section 6851, 6852, or 6861 no assessment of a deficiency in respect of any tax imposed by subtitle A, or B, chapter 41, 42, 43, or 44 and no levy or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer, nor until the expiration of such 90-day or 150-day period, as the case may be, nor, if a petition has been filed with the Tax Court, until the decision of the Tax Court has become final.