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Tax Court Won’t Rule in Similar Mailing Label Cases Until the Seventh Circuit Rules in Tilden v. Comm’r

Posted on May 9, 2016

Frequent guest poster Carl Smith was at last week’s ABA Tax Section meeting in Washington and brings us up to date on the Tilden case, now on appeal and which Carl discussed in a post from December. As Carl discusses, now that the case is on appeal the Tax Court seems to be taking a wait and see approach in other cases with similar issues.   Les

I wanted to pass along to PT readers some things I learned at the ABA Tax Section Court Procedure Committee meeting in Washington D.C. this past Friday. It has to do with the mailing case of Tilden v. Commissioner, T.C. Memo. 2015-188. I blogged on Tilden this past December. The things I learned, including after doing my own further investigations, are: (1) that Tilden is currently on appeal in the Seventh Circuit, (2) that four other currently-pending Tax Court cases present the same issue, and (3) that Chief Judge Thornton has stayed further proceedings in these four other cases – each appealable to different Circuits – “pending the ultimate outcome in Tilden”.

In Tilden, a taxpayer mailed a deficiency petition to the Tax Court, affixing both a postage label from showing the 90th day and a certified mail sticker.  When the envelope arrived at the Tax Court on the 98th day, the envelope bore no USPS postmark.  In its initial motion, to dismiss for lack of jurisdiction, the IRS relied on one provision of the section 7502 regulations – arguing that internal USPS tracking information should be treated as a USPS postmark and that since the tracking information showed the envelope entering the USPS system after the 90th day, the petition was untimely.  During the course of later filings on the motion, the IRS, however, changed its position on which was the applicable regulation provision, pointing to a different one for dismissing the case.  The taxpayer took a third position – pointing to a third section 7502 regulation provision that the taxpayer thought applied and made the filing timely.

In Tilden v. Commissioner, T.C. Memo. 2015-188, the Tax Court agreed with the IRS’ first position and held the petition untimely based on the USPS tracking information.

The taxpayer then filed a motion for reconsideration — arguing that the Court was relying on the wrong provision of the section 7502 regulations.  Surprisingly, in responding to the motion, the IRS joined the taxpayer’s argument as to the proper regulation provision and now argued that, under this third provision of the regulations, the petition was timely.  In an unpublished order, the Tax Court refused to change its ruling.

So, in Tilden, the IRS had taken three different positions on which provision of the section 7502 regulations applied – coming to its own conclusion different from the Court.

At the ABA Tax Section Court Procedure Committee meeting this past Friday, Richard Goldman – a long-time Branch Chief in the Associate Chief Counsel (Procedure & Administration)’s office – alerted the audience that Tilden had been appealed and that there were a number of similar Tax Court cases pending in which the court was suspending ruling on motions to dismiss until the appeals court rules in what will be a case of first impression in the appellate courts.

When I got back home, I did a little research. First, I found that on December 21, 2015, the taxpayer appealed the dismissal of Tilden to the Seventh Circuit, where the appeal has been given Docket No. 15-3838. From a PACER docket search, I learned that the case did not settle during a settlement conference – which may mean that the Department of Justice disagrees with the IRS about whether the Tax Court has jurisdiction in the case.  Next, the opening appellant’s brief is due June 13, 2016, and the government’s answering brief is due on July 13, 2016. Until the DOJ files its answering brief this summer, we really won’t know what position the government takes in the appeal. Finally, Tilden is represented by counsel in the appeal, so this will likely not be a badly-argued case for the taxpayer. However, it is that counsel whose office affixed the label.

Using the Tax Court’s order search function and searching for orders issued since last December that mentioned Tilden, I located the following four pending Tax Court cases in which the IRS initially moved to dismiss the case for lack of jurisdiction, but is now asking (in supplemental filings) that the court not dismiss the cases because the IRS relied on the wrong provision of the section 7502 regulations in its initial motion: Corey v. Commissioner, Docket No. 13312-15 (pro se case, appealable to Ninth Circuit); Frieda G. Oliner Irrevocable Trust v. Commissioner, Docket No. 12766-15 (has counsel, appealable to the First Circuit); Pearson v. Commissioner, Docket No. 11084-15 (has same counsel as in Tilden, appealable to Eight Circuit); Piepmeyer v. Commissioner, Docket No. 30486-15S (pro se case; if “S” removed, appealable to the Sixth Circuit).

One of the orders I found quotes a little from the IRS supplemental filing as follows:

  1. On reflection and contrary to respondent’s motion, respondent believes the timeliness of the petition is properly determined under Treas. Reg. § 301.7502-1(c)(1)(iii)(B)(1), because the postmark was made by other than the U.S. Postal Service and the item was received by the Court not later than the time when a document contained in an envelope that is properly addressed, mailed, and sent to the Court would ordinarily be received if it were postmarked at the same point of origin by the U.S. Postal Service on the last day of the period prescribed for filing.

  1. Because the petition in this case was received and filed by the Court on the 98th day from the date of the notice of deficiency and in light of the fact that the 90th day fell on a Sunday, respondent now believes the petition was timely placed in the mail by the petitioner not later than the last day of the period for filing, i.e., November 30, 2015; therefore, respondent asks that the motion be denied.

Order of Chief Judge Thornton, dated March 31, 2016, in Piepmeyer.

In each of the four cases, Chief Judge Thornton has issued an order formally staying proceedings “pending the ultimate outcome in Tilden”.

I will keep monitoring the Tilden appeal and these four other stayed Tax Court cases and report back to PT readers any important developments.

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