The federal government shutdown is stretching into week four, and there is no end in sight. The shutdown has affected all federal agencies and courts, including the United States Tax Court. One question raised by the shutdown is what effect does it have on Tax Court filing deadlines? The question is important because statutory filing deadlines are jurisdictional. The answer to the question, however, is that it is not clear under current law.
In McCoy v. Commissioner, Dk. No. 25941-13S, which was decided in 2014, the Tax Court stated that it lacked authority to extend a filing deadline that was missed because the clerk’s office was closed as a result of the government shutdown in 2013. As explained in more detail below, however, a more recent case signals the Court may have changed its position and that McCoy is no longer good law. In Guralnik v. Commissioner, 146 TC 230 (2014), the Court indicated that any day the clerk’s office is closed for business would be considered a “legal holiday” within the meaning of Internal Revenue Code (“IRC”) § 7503, and thus filing deadlines falling on those days are extended to the next day the clerk’s office is open. Since the Tax Court clerk’s office is closed during the shutdown, the rationale of Guralnik should apply to extend filing deadlines occurring during the shutdown. Taxpayers and practitioners are cautioned to assume that Guralnik does not apply and that filing deadlines are not extended.
On the eve of the shutdown, the Tax Court posted an announcement on its website reminding taxpayers that during the shutdown they can comply with statutory filing deadlines by mailing a petition to the Court on or before the date of the deadline. If the requirements of IRC § 7502 are met, the petition will be deemed filed on the date of mailing, as opposed to the day the petition is actually received by the Court. IRC § 7502 is commonly referred to as the “mailbox rule.” Although the requirements of that section appear simple, they can be a trap for the unwary. Given the fact that mailing is currently the only way to file a petition with the Tax Court, it’s essential to ensure the requirements of IRC § 7502 are met when mailing a petition to the Court.
This article reviews the requirements of IRC § 7502, identifies some of the more common pitfalls of that section, and then suggests ways to avoid them. Inevitably, however, someone will miss a statutory filing deadline that occurs during the shutdown, either because they did not attempt to file a petition or because they attempted to mail a petition, but they did not comply with the requirements of IRC § 7502. For the benefit of those taxpayers, this article explains how Guralnik might apply to extend the filing deadline to the date the Tax Court reopens after the shutdown. To set the stage, particularly for those readers who are not familiar with the subject matter, this article begins with some background regarding Tax Court filing deadlines and jurisdiction.
Background on Statutory Filing Deadlines
When a taxpayer receives a notice of deficiency following an audit or a notice of determination following a collections due process hearing, the taxpayer has the right to challenge the deficiency or determination by filing a petition in Tax Court within a certain statutorily prescribed period of time (generally 90 days after mailing of the notice of deficiency in the case of a proposed assessment following an audit, or within 30 days of the determination, in the case of a collections actions).
Unlike federal district courts, the Tax Court does not currently allow taxpayers to file petitions online. Taxpayers must either hand deliver the petition or mail the petition to the clerk’s office. Since the Tax Court is located in Washington, D.C., most people opt for mailing, rather than hand delivering, a petition to the Tax Court even when it is not closed. Of course, as long as the government is closed, however, mailing is the only option.
As a general rule, a petition is not considered filed until it is actually received by the Tax Court clerk. However, if the petition is mailed, and if the requirements of IRC § 7502 are met, the petition will be deemed filed on date it was mailed rather than the date it is received by the Tax Court clerk. If the requirements of IRC § 7502 are not met, the general rule regarding filing applies (i.e.. filing occurs only if and when the petition is actually received by the clerk).
Of course, the Tax Court is not open for business 24 hours a day, seven days per week. Recognizing this, Congress included a rule which extends the filing deadline under certain circumstances. Those rules are set forth in IRC § 7503. Under that section, if the last day prescribed under the IRC for filing falls on Saturday, Sunday, or a legal holiday, a petition will be considered timely if filed on the next succeeding day which is not a Saturday, Sunday, or a legal holiday. For such purposes, the term “legal holiday” means a legal holiday in the District of Columbia.
Mailbox Rule – Requirements, Pitfalls, and Best Practices
The mailbox rule is set forth in IRC § 7502(a), which states as follows:
If any return, claim, statement, or other document [e.g., a Tax Court petition] required to be filed . . . within a prescribed period or on or before a prescribed date under authority of any provision of the internal revenue laws is, after such period or such date, delivered by United States mail to the agency, officer, or office [e.g., the Tax Court] with which such return, claim, statement, or other document is required to be filed . . . , the date of the United States postmark stamped on the cover in which such return, claim, statement, or other document . . . is mailed shall be deemed to be the date of delivery. . . .
To get the benefit of the mailbox rule, several requirements must be met: (1) the date of the United States Postal Services (‘USPS”) post mark on the envelope containing the petition must be on or before the due date of the petition; (2) the envelope containing the petition must be properly addressed and proper postage must be paid; (3) the petition must be “deposited in the mail in the United States”; and (4) the petition must be received by the Tax Court clerk after the due date.
Perhaps the biggest pitfall of the mailbox rule is not being able to prove the requirements of IRC § 7502(a) were met. If a taxpayer simply puts a petition in an envelope addressed to the Tax Court, stamps the envelope containing the petition, and then puts it in the mail, the taxpayer will have no way of showing that any of the statutory requirements were met if the package is lost in transit. To avoid this pitfall, taxpayers should always use registered or certified mail with return receipt requested. Under IRC § 7502(c) and Treas. Reg. § 301.7502-1(e)(2), proof that the document was properly registered or that a postmarked certified mail sender’s receipt was properly issued and that the envelope was properly addressed to the Tax Court clerk’s office constitutes prima facie evidence that the petition was delivered to the Tax Court. Other than direct proof of actual delivery, proof of proper use of registered or certified mail are the exclusive means to establish prima facie evidence of delivery of a document to the Tax Court.
Another pitfall of the mailbox rule is using a private delivery service, such as UPS, DHL, or FedEx, as opposed to USPS. Many taxpayers assume private delivery services are comparable or better than USPS, and in many instances they are. However, IRC § 7502 was drafted, and law was developed, prior to the advent of many commonly used private delivery services. Per its terms, IRC § 7502(a) only applies if a petition is sent by U.S. Mail. Although Congress later amended IRC § 7502 include subsection (f), which allows a taxpayers to use certain private delivery services that are available to the general public, are at least as timely and reliable as the USPS, record the date on which the package is delivered, and are designated by the IRS, not all delivery options offered by a private delivery service may qualify. Indeed, this was the problem in Guralnik. The taxpayer used FedEx First Overnight, but that delivery option was not listed as a designed private delivery service at the time.
The last common pitfall is failing to obtain a proper postmark. In order to meet the requirements of IRC § 7502(a), the envelope containing the package must bear a U.S. postmark and the package must be sent from the United States. A foreign postmark is not sufficient for Tax Court filings.1 Taxpayers get tripped up on this requirement, in part, because this is the one area where the rules for Tax Court filings differ from the rules for filing documents with IRS. Although IRS will accept a foreign postmark that meets the same standards as a U.S. postmark, the Tax Court will not.2
In sum, to get the benefit of the mailbox rule, taxpayers must strictly ensure that all requirements of IRC § 7502(a) are met. The best way to do that is to send the petition to the Court via registered or certified mail with the USPS, return receipt requested. To prove mailing, make sure you keep a copy of the registration receipt or certified mail receipt which should be filed stamped with the date the package was delivered to the USPS. And to prove that the envelope was properly addressed, make a copy of the addressed envelope prior to putting it in the mail.
Using Guralnik to Extend Deadlines Missed During Shutdown
The foregoing comments were made with the hope that they will assist readers in complying with filing deadlines that occur during the shut. Inevitably, however, filing deadlines will be missed due to the shutdown, and taxpayers will find themselves on the receiving end of a motion to dismiss. When that happens, the taxpayers will no doubt cite the shutdown as the cause of the failure and argue for an extension.
Historically, the Tax Court has strictly construed statutes establishing filing deadlines and has expressed reluctance to recognize equitable exceptions not authorized by the IRC. The Tax Court’s reluctance in this regard is based on a mix of concerns involving separation of powers and judicial deference. The Tax Court is not a court of equity; its jurisdiction is defined by Congress and limited to the IRC. The rules establishing filing deadlines are part of a carefully crafted statutory scheme, which also is established by Congress, and they are intended to implement and balance several competing policy considerations. Recognizing an exception to suit the facts of an individual case could upset the careful balance Congress has created. Accordingly, the Tax Court’s view is that Congress, not the Tax Court, should decide whether an exception is warranted in a particular situation.
At the same time, experienced tax practitioners know that the equities of a case are not lost on the Tax Court. Although the Tax Court may not be willing to recognize equitable exceptions not authorized by the IRC, it may be receptive to an equitable argument, as long as it has some basis in the IRC. Guralnik is an example of a case where that occurred.
Guralnik involved an appeal of a notice of determination following an administrative hearing in a collections due process case. Under IRC § 6330(d)(1), a petition appealing a determination in a collections due process case must be filed within 30 days of the date of the notice of determination. In Guralnik, the thirtieth day fell on February 15, 2015, but that was a Sunday and Monday, February 16, 2015, was a legal holiday. Accordingly, the due date was extended per IRC § 7503, as explained above, to Tuesday, February 17, 2015. On Friday the 13th – which should have been an omen of things to come – the taxpayer sent the petition to the Tax Court using FedEx First Overnight delivery. The petition should have been delivered on Tuesday, February 17, 2015; however, due to a snowstorm in the District of Columbia, all federal offices, including the Tax Court, were closed. Consequently, the petition was not delivered until Wednesday, February 18, 2015.
As expected, the IRS filed a motion to dismiss for lack of jurisdiction, citing the taxpayer’s failure to timely file as the basis. The equities of the case were clearly in the taxpayer’s favor, but he had a weak position based on the law. The only statutory bases for extending the deadline to Wednesday, February 18, 2015, were IRC § 7502 and IRC § 7503. The problem with the taxpayer’s argument under IRC § 7502 was that the petition was not sent using designated private deliver service. Although FedEx First Overnight is the fastest delivery service that FedEx offers, it was not on the IRS approved list of designated private delivery services because the IRS had not updated the list of designated private delivery services in 11 years. The problem with the taxpayer’s argument under IRC § 7503 was that Wednesday, February 18, 2015, was not a legal holiday under District of Columbia law, and IRC § 7503 does not include a provision that extends the deadline when the Tax Court is closed on a weekday that is not a legal holiday.
The taxpayer’s counsel made several arguments, including one for an equitable tolling exception to the statutory filing period and another based on recent decisions of the United States Supreme Court that distinguished claim processing requirements – such as deadlines to file – from jurisdictional requirements. Ultimately, both of those arguments were rejected. The taxpayer’s argument regarding IRC § 7502 was rejected as well for the reasons set forth above. The argument that won the day, however, was that Wednesday, February 18, 2015, should be considered a legal holiday for purposes of IRC § 7503 because all District of Columbia and federal offices were closed due to the snowstorm. The Tax Court reached its decision based on the legislative history of IRC § 7503 and the absence of a provision in that section and in its own rules addressing the computation of time when the Tax Court’s offices is inaccessible. Based on Rule 1(b) of the Tax Court Rules of Practice and Procedure, which provides that the Tax Court or any judge “before whom the matter is pending may prescribe the procedure, giving particular weight to the Federal Rules of Civil Procedure to the extent that they are suitably adaptable to govern the matter at hand,” provided a textual basis for the decision by importing rule Rule 6(a)(3)(A) of the Federal Rules Civil Procedure, which extends a filing deadline to next business day if the clerk’s office is inaccessible.
Although the Tax Court’s decision in Guralnik was criticized by the IRS and some commentators for its lack of textual moorings, it was not appealed. Further, it was issued as a fully reviewed Tax Court decision, making it binding precedent. The circumstances underlying Guralnik are similar to the circumstances that taxpayers face with a government shutdown. In both cases, the Court is inaccessible for filing because of a closure of federal government offices. Therefore, the rationale of Guralnik should apply to extend filing deadlines missed as a result of shutdown until the day the Tax Court reopens.
For more information on the Guralnik case and how it could apply in the context of a shutdown, I encourage readers to review Prof. Leslie Brook’s discussion of the case on Procedurally Taxing. Links to the latest post on the case can be found here. The discussion is particularly informative because contributors to the blog represented the taxpayer in the Tax Court proceedings.