We have discussed many times the issues that practitioners and taxpayers face when trying to prove they have filed a tax return or other document with the IRS or Tax Court. A recent case in Tax Court, Seely v Commissioner, involves a taxpayer’s attorney who mailed a petition to Tax Court via old fashioned first class postage and not via certified mail, registered mail or an authorized private delivery service. In Seely, the Tax Court received the petition, but not until 111 days after the date of the 90-day letter. Seely claimed that his lawyer mailed the petition four days before the 90-day period ended to file a petition timely and properly and fully secure the Tax Court’s jurisdiction to hear the case. Unfortunately for Seely (or so it seemed) the envelope containing the petition had no discernible postmark. The IRS argued that the taxpayer failed to petition the Tax Court within the 90-day period and moved to dismiss the petition for lack of jurisdiction.
Our faithful readers know where this may be heading. Section 7502 provides, in general, that if a document is delivered to the IRS by the United States mail after the due date, then the date of the United States postmark on the envelope is deemed to be the date of delivery (i.e., filing). The statute also provides that for registered mail, the registration is prima facie evidence that the document was delivered, and that the date of registration is deemed to be the postmark date. For good measure, the statute says that Treasury can issue rules to flesh out how the statutory rules for registered mail filing can apply to mailing via certified mail or through an authorized private delivery service. IRS has issued regulations and other guidance that fills out the details on certified mail and the use of private carriers.
Back to Seely. The regulations under Section 7502 do not directly address envelopes with no postmarks (they do addresses postmarks that are “not legible” and provide that the taxpayer has the burden of proving the postmark date when the postmark is not legible). As his lawyer did not send the petition by certified mail, registered mail or through an authorized private delivery service, and as there was no postmark at all, the rules generally default to the filing date equaling the date that the document was received (in this case by the Tax Court). Yet the opinion in Seely notes that there is precedent in Tax Court to allow taxpayers to prove the mailing date through extrinsic evidence, like testimony, the amount of time the document allegedly took to arrive as compared to the time that the document should take to arrive, and whether the document or envelope has the markings that indicate that they may have been misplaced or lost along the way. When relying on extrinsic evidence, the standard the taxpayer has to satisfy to prove the mailing date is proof by convincing evidence.
Seely opposed the motion to dismiss, and Seely had as part of the record a sworn statement by the attorney claiming that they deposited the petition in the US mail four days before the last date for filing the petition. The IRS submitted proof that it normally takes 8 – 15 business days for documents to be delivered to a government agency or office in DC (while this seems like an excessive amount of time, the opinion drops a footnote discussing how mail to Tax Court goes through an irradiation process adding an extra 5 to 10 days). The government helpfully noted that Seely’s petition allegedly arrived 16 business days after his attorney claimed that he mailed it from Washington State.
In light of the amount of time the document took to arrive, the IRS asked the court to consider the lawyer’s statement to fail to meet the standard that the taxpayer had convincing evidence that the petition was timely filed.
The Tax Court, in an opinion by Judge Vasquez, disagreed:
First, we note that the petition arrived at the Court only one business day late. We also note that the Fourth of July holiday. In prior cases holiday conditions at the post office (e.g., holiday closures, unusually large volumes of mail, or inefficiencies attributable to temporary staff) have been found to be a possible explanation for short delays in delivery. We are thus unpersuaded by respondent’s argument that Mr. Boyce’s declaration is not reliable because the petition’s alleged mailing date does not square with its actual delivery date. (citations and footnote omitted).
When one crunches the numbers, to get to the 21 actual days he allowed after the due date and to mesh with the lawyer’s sworn statement that he mailed the petition three days before the due date, Judge Vasquez effectively allows 24 days for the mailing, which includes eight weekend days and a holiday on top of the 15 business days to get to the needed 24 days.
At the end of the day, the sworn statement by the attorney, the 4th of July holiday and actual delivery close in time to the far end of estimated number of business days it takes for mail to get to DC were enough, and the Tax Court denied the government’s motion to dismiss.
Seely lives to fight the proposed deficiency on the merits.
Observations
This is the place where it makes sense to remind practitioners to fork over the extra few bucks to mail documents via registered mail, certified mail or through an authorized private delivery service.
Readers may also recall US v Baldwin, a 9th circuit case that Carl Smith has written about (the circuit that would likely have venue in an appeal of Seely). In that case, the 9th Circuit held that
- regulations [the excerpt I quote below] that the IRS finalized in 2011 essentially supplanted the common law mailbox rule,
- the regulations were valid under the familiar two-step Chevron test, and
- under the Brand X doctrine the regulations essentially trumped prior 9th Circuit precedent that held that Section 7502 did not supplant the common law mailbox rule because the prior case law did not reflect the 9th circuit’s conclusion that the outcome it chose was based on an unambiguous reading of the statute .
Those regulations provide as follows:
Other than direct proof of actual delivery, proof of proper use of registered or certified mail, and proof of proper use of a duly designated [private delivery service] . . . are the exclusive means to establish prima facie evidence of delivery of a document to the agency, officer, or office with which the document is required to be filed. No other evidence of a postmark or of mailing will be prima facie evidence of delivery or raise a presumption that the document was delivered.
I had read the regulations as applying in cases where the document was never delivered (as in Baldwin, involving a refund claim), as well as in cases where the document eventually made its way to the IRS or in Tax Court (as in Seely, where the Tax Court eventually did receive the petition). Yet Seely notes and distinguishes Baldwin because in Seely the document was actually delivered. That opened the door for the Tax Court, consistent with its approach in other cases, to consider the extrinsic evidence to prove when the petition was placed in the mail.
What about the reach of and validity of the 2011 regulations? As readers may be aware, the taxpayers have filed a cert petition in Baldwin (last month the government filed its opposition, here and the taxpayer filed their reply). The case is an interesting vehicle for possibly overruling the Brand X doctrine, which holds that a “prior judicial construction of a statute trumps an agency construction otherwise entitled to Chevron deference only if the prior court decision holds that its construction follows from the unambiguous terms of the statute and thus leaves no room for agency discretion.” There is significant hostility to Brand X among some (see the numerous amici) and the doctrine raises interesting questions as to which branch should be responsible for the final say on a statute that on its face at least allows for competing reasonable interpretations.
While I am not sure that the Supreme Court will take the bait on Baldwin to consider overturning Brand X, I do expect that there will be plenty of additional litigation concerning the reach and validity of the 7502 regulations. After all, despite the relative low cost of avoiding these kinds of disputes by mailing in a way that guarantees evidence of mailing, and the increasing use of electronic filing (which has its own 7502 issues), there are enough taxpayers and practitioners who seem willing to roll the dice and courts (and practitioners) have been struggling with 7502 for decades.