In two recent Orders, Kristen B. Hillenbrand v. Commissioner and Shea M. Hillenbrand v. Commissioner, the United States Tax Court addressed the critical procedural intersection between proper mailing of a Notice of Deficiency (NOD) and a taxpayer’s actual receipt of that notice. For tax professionals representing clients in Collection Due Process (CDP) hearings, these cases provide a significant precedent regarding the evidentiary weight of taxpayer testimony against United States Postal Service (USPS) tracking records when contesting underlying tax liabilities.

Factual Background and Administrative Proceedings

The cases involve spousal taxpayers residing in Arizona. Shea M. Hillenbrand (Petitioner in Docket No. 18928-23L) failed to timely file a return for the 2012 tax year. Following a substitute for return and an initial Notice of Deficiency, he filed a late return, prompting the IRS to issue a "Second 2012 Notice". Additionally, the IRS mailed Notices of Deficiency for the 2018 tax year to both Shea and Kristen Hillenbrand (Petitioner in Docket No. 18927-23L). The IRS assessed the taxes on June 27, 2022.

Following the issuance of Letter 1058-A, Final Notice of Intent to Levy, the petitioners timely requested administrative hearings, seeking collection alternatives including installment agreements and offers-in-compromise. During the administrative process, the Settlement Officer (SO) requested standard collection information statements (Forms 433-A and 656), which were not initially provided.

The core dispute arose when the petitioners’ representative claimed the taxpayers never received the deficiency notices. The administrative record contained undated copies of the 2018 Notices and, in Shea’s case, was missing the Second 2012 Notice entirely. Relying on Internal Revenue Manual guidance, the SO utilized a Certified Mailing List to establish issuance. The SO verified the petitioners’ residence at the time of mailing and informed the representative that the mailing list, labeled as a substitute for Form 3877, indicated the notices were mailed to the record address. The SO took the position that "refusal to accept or pick-up the Notice is not a defense to not receiving it" and issued Notices of Determination sustaining the collection actions.

Standard of Review and the Scope of Evidence

The Tax Court first established the appropriate standard of review. Under Section 6330(c)(2)(B), a taxpayer may challenge the existence or amount of the underlying tax liability only if they did not receive a notice of deficiency or otherwise have a prior opportunity to contest it.

The Court noted that when liability is properly at issue, it reviews the IRS’s determinations de novo. Conversely, when underlying liability is not at issue, the Court reviews for abuse of discretion, which exists when a determination is "arbitrary, capricious, or without sound basis in fact or law".

Crucially, the scope of review differs based on the standard applied. While abuse of discretion review is generally limited to the administrative record under Keller v. Commissioner, the Court emphasized that "[u]nder a de novo standard of review of the underlying liability, we may go beyond the administrative record to consider all relevant evidence". Consequently, the Court held an evidentiary hearing to resolve ambiguities regarding receipt, considering "information outside the administrative record, namely petitioner’s and her husband’s testimony".

Legal Analysis: Validity of Mailing vs. Actual Receipt

The outcome of these cases turned on the rebuttable presumption of delivery. A notice of deficiency is generally valid if mailed to the taxpayer’s last known address pursuant to Section 6212(b). The Court reiterated that "[w]here the existence of the notice of deficiency is not in dispute, a properly completed Form 3877 by itself is sufficient, absent evidence to the contrary, to establish that the notice was properly mailed to a taxpayer".

The IRS presented a Certified Mailing List with a postmaster signature, and although the administrative record copies of the NODs were undated or missing, the IRS attached USPS records to its Motion for Summary Judgment showing a tracking number matching the mailing list and a signature confirming receipt. The Court acknowledged that "the Certified Mailing List, matching tracking number from USPS, and signature may suffice to prove mailing".

However, the presumption of official regularity includes a presumption of receipt which a taxpayer may rebut. The Court cited Sego v. Commissioner, stating that "[a] taxpayer may rebut the presumption of receipt by a preponderance of the evidence that the notice of deficiency was not actually received... so long as receipt was not deliberatively refused".

Application of Law to Facts: The "Professional Athlete" Defense

The Court denied the IRS’s Motion for Summary Judgment, finding that the petitioners successfully rebutted the presumption of receipt through credible testimony.

The factual twist in these cases involved the specific habits of the petitioners. Shea Hillenbrand, a former professional athlete, testified regarding his privacy practices. The Court noted: "Petitioner testified that he does not answer the door due to his prior career as a professional athlete and that the signature from the USPS record was not his". Kristen Hillenbrand similarly testified she was not home during the alleged delivery.

The Court weighed the USPS records against this testimony and ruled in favor of the taxpayers. "On the basis of their testimony, we conclude by a preponderance of the evidence that petitioner did not receive the 2018 Notices" (and the Second 2012 Notice in Shea’s case).

Conclusion and Remand

Because the Court determined the taxpayers did not receive the Notices of Deficiency, they were denied a prior opportunity to contest their liability. The Court found that the issue was raised during the administrative hearing but summarily dismissed by the SO once residency was confirmed. The Court observed: "Because SO Harvey issued the Supplemental Notice of Determination as soon as petitioner confirmed that she lived at the Queen Creek address... petitioner did not have an opportunity to contest the underlying tax liability".

Accordingly, the Court issued orders in both dockets denying the respondent’s Motion for Summary Judgment and remanding the cases to the Independent Office of Appeals. The Court ordered that a supplemental administrative hearing be held no later than March 23, 2026, to "afford petitioner an opportunity to dispute the underlying liability" for the relevant tax years.

Key Takeaways for Practitioners

USPS Tracking is Not Absolute: Even with a matching tracking number and a signature on file, a taxpayer can rebut the presumption of receipt with credible testimony proving the signature is not theirs and that they did not see the notice.
Scope of Review: When contesting receipt of an NOD (and thus the ability to challenge liability), the Tax Court may look beyond the administrative record and consider testimonial evidence.
Preservation of Rights: Practitioners must explicitly request consideration of the underlying liability during the CDP hearing if there is any question regarding the receipt of the statutory notice. As the Court noted, "[a]n issue is not properly raised at the administrative hearing if the taxpayer fails to request consideration of the issue".

Prepared with assistance from NotebookLM.