In criminal proceedings in Our Fair State, when this red “E” lights up, it means a tribunal has made an error so grave that it totally undermines its findings, so that even without objection by the injured defendant or their counsel, even when right of appeal is waived, the findings must be tossed.

OK, but our courts are armed cap-à-pié with the full judicial power of Our Fair State. What can pore l’il ol’ Tax Court do?

That Obliging Jurist Judge David Gustafson would like to know, and in pursuance thereof, he’d like IRS and Tatsuya Kito, Docket No. 20174-19L, filed 4/7/22, to tell him.

Tats petitioned six (count ’em, six) years’ worth of NODs from a NITL and a NFTL; sent in an OIC which got bounced. Tats’ OIC included years not in the NITL or NFTL, but that’s OK. Judge Gustafson has the cases; you can even throw in TFRPs. At every stage, Year X was included in the proceedings.

Except the NOD from the NITL, which only discusses the six years petitioned, reviews seven (count ’em, seven) years, throwing in one not petitioned, but provides a chart on Page One showing only five (count ’em, five) of petitioned years, but leaving off Year X. Appeals decides Tats can pay in full, so no CAlt. (CAlt stands for collection alternative, not to confuse with abbreviation for California).

Tats then files his petition (not specifying which years are involved but attaching the NOD), and seeks remand for change-of-circumstances. The Supplemental NOD only addresses the five years, sustains the collection.

Then Tats and IRS send in a stipulated decision including Year X.

Judge Gustafson bounces it. Pore l’il ol’ Tax Court’s jurisdiction is straitjacketed.

“Strictly speaking, we do not review the IRS’s collection notices (i.e.,  neither the notice of lien filing (which included Year X) nor the proposed levy (which did not)); rather, we review IRS Appeals’ determination as to those collection notices. If IRS collection personnel filed a notice of lien for Years 1 and 2, but (when that collection became the subject of a CDP hearing) IRS Appeals sustained the lien as to Year 1 and did not reach Year 2, then the Tax Court’s jurisdiction in a subsequent case under section 6330(d)  extends only to Year 1 and does not extend to the year as to which IRS Appeals made no determination.” Order, at p. 4.

IRS asks Judge Gustafson to decide that Appeals did make a determination as to Year X. Just a mistake in the paperwork.

No go.

“IRS Appeals’ multiple explicit statements of the periods as to which it was making a determination is the best evidence of the extent of its determination. To go beyond the literal language of the determinations (arguably, to contradict it) sets us on a most uncertain path, whereas we ought to entertain jurisdiction only where it has been plainly conferred on us. We begin with the presumption that the notices mean what they repeatedly say. This is most weighty.” Order, at p. 4.

Judge Gustafson cannot find even an implicit decision. Neither petition nor answer specified years at issue. “The original and supplemental notices simply refer to the CDP requests; they do not mention, even glancingly, that the CDP requests included [Year X].” Order, at p. 5. Judge, I think you meant “tangentially.”

Howbeit, the OIC was bounced, right? And it mentioned Year X, right? But as hereinabove stated (as my expensive colleagues would say), you can throw anything you like into an OIC. Appeals can only consider what the NOD says. Tax Court can only review the NOD itself.

And now we come to mode-of-proceedings. IRS claims harmless error, as prosecutors do when they or the court blew it. But Judge Gustafson applies our good NY learning.

“The harmless error rule ‘is to be used only “when a mistake of the administrative body is one that clearly had no bearing on the procedure used or the substance of decision reached.”‘ Romano-Murphy v. Commissioner, 152 T.C. 278, 311 (2019) (quoting U.S. Steel Corp. v. EPA, 595 F.2d 207, 215 (5th Cir. 1979)). Here, however, the error (if it was an error) had a definite ‘bearing’ on the ‘substance of [the] decision’, leaving unclear the critical question whether a particular year was in fact addressed in the determination.

“In this case it is not at all implausible to suggest that IRS Appeals may have meant to include [Year X] in its determination, or that IRS Appeals would have included [Year X] if it had noticed it, or that IRS Appeals intended to add [Year X] but failed to do so, or that IRS Appeals obviously ought to have done so, as efficiency, coherence, and good government would require. But these plausible suggestions do not tell us what IRS Appeals actually did determine.” Order, at p. 6.

For Romano-Murphy, see my blogpost “Assessment First, Determination Afterward,” 5/19/21.

OK, so Tax Court is out of it for Year X. So what to do?

“Perhaps, since the parties are not bound by our jurisdictional limits, they can reach an agreement that could be stipulated–even in the portion of the proposed stipulated decision document below the judge’s signature line. See Hill v. Commissioner, T.C. Memo. 2021-121, at *18. Or perhaps a second remand could be undertaken to allow IRS Appeals to issue a supplemental determination that addresses petitioner’s CDP request as to [Year X] (which remains pending if, as we hold, no determination for that year has yet been made). Or there may be superior alternatives.” Order, at p. 6.

For Hill, see my blogpost “Three Point Play,” 10/25/21.

For Tats and IRS, talk among yourselves.