Equitable Principles and Jurisdictional Time Periods, Part 2

Abstract

This is the second of two articles looking at the relationship of equitable doctrines and time limits in the Tax Code. In the first article “Equitable Principles and Jurisdictional Time Periods” I showed how courts apply a mythical rule that equitable principles cannot apply to jurisdictional time limits. I showed why this rule is in fact a myth and argued that both normatively and empirically, the question of whether equitable principles can be applied to a given time period is a different question than whether the time period is “jurisdictional.” This article addresses a different aspect of how equitable doctrines affect a jurisdictional time period in tax law. When one studies the case law, one finds many instances where the Tax Court---often blessed by the Courts of Appeals---laments that it may not equitably “enlarge” or “extend” jurisdictional time periods, but then accomplishes the same result through its discretionary fact-finding power. In effect, it cheats. Less dramatically, it creates fictions to cover the gap between what is and what ought to be. While denying the power to use equitable principals to modify the legal bed, it instead uses equitable principles to stretch or lop off facts to fit a procrustean conception of the relevant limitation period. Part I of this article explains how the Tax Court has used equitable powers to create the facts necessary to obtain jurisdiction. Part II explores how the Tax Court has used equitable powers to ignore facts that would deny it jurisdiction. Part III shows how the Tax Court has used equity to alter how it counts the relevant time periods when doing do furthers the purpose of the statutes giving taxpayers access to judicial review. As I show below, the Tax Court is quite sympathetic to allowing parties to get to the merits of a case and so will bend and twist facts to give parties that chance where possible. Finally, Part IV takes a critical look at the common-sense reaction that the difference between facts and law justify this use of equity to indirectly alter applicable time periods when, at the same time, the Court refuses to use equity to directly toll a time period or estop the government from asserting a time period as a defense.

Keywords: equitable tolling, equitable estoppel, jurisdictional time periods, jurisdictional statutes, subject-matter jursidiction, limitation on assessments, statute of limitations, 6501, exceptions to limitation periods, limitation periods

JEL Classification: K10, K34, K40, K41