Tax Court Dismisses Petition Filed By Suspended Corporation

(Parker Tax Publishing April 2026)

The Tax Court held that a corporation that filed a petition with the Tax Court to appeal the outcome of a collection due process hearing at a time when its corporate status was suspended under state law, but revived its corporate status after the filing of the petition and the 30-day limitations period under Code Sec. 6330(d)(1), lacked the capacity to file the petition and the court therefore dismissed the case. The court found that under the applicable state law, the corporation's revival did not relate back to the date it filed its petition. Arbor Vita Corp. d.b.a. Hemediagnostics v. Comm'r, 166 T.C. No. 5 (2026).

Background

Arbor Vita Corp., doing business as Hemediagnostics (Arbor Vita), was organized as a corporation under California law in 1998. Arbor Vita's powers, rights, and privileges as a California corporation were suspended as of July 1, 2024, for its failure to file certain state tax returns. For tax year 2017 the IRS determined that Arbor Vita failed to pay its unemployment tax liability and further assessed a Code Sec. 6721 penalty for failure to file Forms W-2, Wage and Tax Statement, with the Social Security Administration.

The IRS subsequently sent Arbor Vita notice that it filed a notice of federal tax lien (NFTL) to collect the outstanding liability and penalty. Arbor Vita timely requested and participated in a collection due process (CDP) hearing with the IRS regarding the proposed collection action. While Arbor Vita's corporate status was suspended, the IRS sustained the filing of the NFTL in a Notice of Determination Concerning Collection Actions Under Sections 6320 or 6330 of the Internal Revenue Code (Notice of Determination), dated March 6, 2025.

Arbor Vita's corporate status remained suspended when it filed a timely petition with the Tax Court on April 3, 2025. On September 17, 2025, Arbor Vita received a Certificate of Revivor, its corporate status was reinstated, and it returned to being a corporation in good standing with the California Franchise Tax Board (FTB).

The IRS moved to dismiss Arbor Vita's case for lack of jurisdiction because Arbor Vita's corporate status was suspended at the time it filed its petition and remained suspended through the expiration of the 30-day period of limitations under Code Sec. 6330(d)(1). In. Boechler, P.C. v. Comm'r, 2022 PTC 112 (S. Ct. 2022), the Supreme Court held that the 30-day deadline in Code Sec. 6330(d)(1) is a nonjurisdictional deadline that is subject to equitable tolling. Arbor Vita argued that the Tax Court should deny the IRS's motion because (1) a Certificate of Revivor retroactively validates a timely petition filed by a suspended corporation under California law and (2) good cause existed to apply equitable tolling.

In California, the FTB may suspend the powers, rights and privileges of a corporation if it fails to pay tax. Once a corporation's powers are suspended, it may not prosecute or defend an action. A corporation may revive its status upon payment of its tax liability and written application to the FTB. California law, however, provides that procedural acts in the prosecution or defense of a lawsuit are validated retroactively by corporate revival, and most litigation activity is characterized as procedural for purposes of corporate revival. Consequently, on revivor of its corporate powers a corporation may continue an action commenced during the period of suspension and not previously dismissed. However, if relation back of revival would prejudice or invalidate an opposing party's defense that accrued because of the suspension of corporate status, regardless of the nature of that defense, then revivor cannot retroactively validate an otherwise procedural act.

Analysis

The Tax Court held that Arbor Vita did not have the capacity to file a petition because under California law its corporate revival did not relate back to the date it filed its petition. Therefore, the court did not have jurisdiction.

The court observed that Arbor Vita did not have the requisite corporate status when it received the Notice of Determination because the FTB had suspended its status on July 1, 2024. Arbor Vita remained without corporate status when it filed its petition on April 3, 2025 (within the 30-day period), and until September 17, 2025, when the FTB deemed it to be in good standing. Following Boechler, Arbor Vita's lack of good standing at the time it filed its petition did not itself bar the Tax Court's jurisdiction over its case because Code Sec. 6330(d)(1) provides a nonjurisdictional, procedural deadline.

The court found that, 31 days after issuing the Notice of Determination, the IRS accrued a statute of limitations defense against any petition filed by Arbor Vita. In the court's view, to retroactively validate Arbor Vita's petition at this point would prejudice the IRS's defense by effectively nullifying it because Arbor Vita's petition would be considered valid and timely filed. Therefore, under California law, the Tax Court could not relate Arbor Vita's corporate revival back to the time it filed its petition.

The court noted that in Community Electric Service of Los Angeles v. National Electric Contractors Association, 869 F.2d 1235 (9th Cir. 1989), the Ninth Circuit addressed a nearly identical situation. In that case, Community Electric was without corporate status at the time it filed an otherwise timely antitrust complaint, and its status was not revived until after the nonjurisdictional period of limitations expired. The Ninth Circuit held that the statute of limitations defense barred relation back because relation back would prejudice that defense. The Tax Court said that, similarly, it was obligated to follow California law, and the court declined to retroactively validate Arbor Vita's petition.

The court also found that equitable tolling did not apply. To be entitled to equitable tolling, a taxpayer must establish (1) that it pursued its rights diligently and (2) that extraordinary circumstances outside of its control prevented it from filing on time. The court observed that under Boechler, the Code Sec. 6330(d)(1) deadline may be equitably tolled, but that it did not apply in this case since Arbor Vita timely filed its petition.

For a discussion of the rules for filing a petition with the Tax Court, see Parker Tax ¶263,510.

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