Tax Court Petition Received 8 Days After Deadline Nevertheless Treated as Timely Filed

(Parker Tax Publishing February 2017)

The Seventh Circuit reversed the Tax Court and held that although the 90-day deadline for filing a Tax Court petition is jurisdictional, the Tax Court could not disregard an agreement between the IRS and the taxpayer that the taxpayer's petition was timely filed. The court rejected the Tax Court's reliance on the date the envelope had entered the Postal Service's tracking system as being indicative of the date the petition was filed. Tilden v. Comm'r, 2017 PTC 17 (7th Cir. 2017).

Background

Code Sec. 6213(a) gives a taxpayer 90 days from the date an IRS notice of deficiency is mailed to the taxpayer to file a petition asking the Tax Court to review the notice of deficiency. Robert Tilden received a notice of deficiency that carried an April 21, 2015, deadline for requesting Tax Court review. The Tax Court received the petition on April 29, 2015, and dismissed it as untimely.

While Code Sec. 6213(a) requires Tax Court petitions to be filed within 90 days, Code Sec. 7502(a) makes the date of the postmark dispositive. Code Sec. 7502(b) adds that the timely mailing as timely filing rule applies in the case of postmarks not made by the Postal Service, but only to the extent provided by the regulations. That mattered to Tilden, because his law firm did not put a stamp on the envelope, and the Postal Service did not apply a postmark. Instead the firm's staff purchased postage from Stamps.com, a service that supplies print-at-home postage. The label from Stamps.com was dated April 21, 2015, and a member of the law firm's staff stated that she delivered the envelope to the Postal Service in Salt Lake City, Utah, on that date.

Tilden contended that his petition was timely filed under Reg. Sec. 301.7502-1(c)(1)(iii)(B)(1), which provides that if the postmark on the envelope is made other than by the U.S. Postal Service then:

(1) the postmark so made must bear a legible date on or before the last date, or the last day of the period, prescribed for filing the document or making the payment; and

(2) the document or payment must be received by the agency, officer, or office with which it is required to be filed not later than the time when a document or payment contained in an envelope that is properly addressed, mailed, and sent by the same class of mail would ordinarily be received if it were postmarked at the same point of origin by the U.S. Postal Service on the last date, or the last day of the period, prescribed for filing the document or making the payment.

Before the Tax Court, the IRS accepted Tilden's contention that the envelope was delivered to the Postal Service on April 21, but invoked Reg. Sec. 301.7502-1(c)(1)(iii)(B)(2), which states that if a document or payment described in Reg. Sec. 301.7502-1(c)(1)(iii)(B)(1) is received after the time when a document or payment so mailed and so postmarked by the U.S. Postal Service would ordinarily be received, the document or payment is treated as having been received at the time when a document or payment so mailed and so postmarked would ordinarily be received.

By relying on Reg. Sec. 301.7502-1(c)(1)(iii)(B)(2), the IRS assumed that eight days (April 21 to 29) is more than the Postal Service ordinarily takes to deliver mail from Salt Lake City to Washington, D.C., which would preclude the use of Reg. Sec. 301.7502-1(c)(1)(iii)(B)(1).

The Tax Court conceded that the Postal Service had not placed a postmark on the envelope. It also observed that the envelope had been entered into the Postal Service's tracking system for certified mail on April 23, and the judge thought that was just as good as a postmark, which meant that April 23 was the date of filing. That was two days late, so the Tax Court dismissed the petition.

Seeking reconsideration, Tilden observed that neither he nor the IRS had raised the possibility that tracking data must be treated as a "postmark made by the U.S. Postal Service." The IRS joined Tilden in contending that the Tax Court had been mistaken. Abandoning its earlier position, the IRS asked the Tax Court to apply Reg. Sec. 301.7052-1(c)(1)(iii)(B)(1) and deem both of its subsections satisfied. But the judge denied the motion, stating that because the 90-day limit in Code Sec. 6213(a) is jurisdictional, the court was not obliged to accept the parties' agreement. Tilden appealed to the Seventh Circuit.

Seventh Circuit's Analysis

The Seventh Circuit reversed the Tax Court and held that Tilden's petition was timely filed. As an initial matter, the Seventh Circuit looked at whether Code Secs. 6213 and 7502, and/or Reg. Sec. 301.7502-1, create a "jurisdictional" rule and, citing Guralnik v. Comm'r, 146 T.C. No. 15 (2016), concluded that filing deadlines for petitions seeking Tax Court review are jurisdictional.

However, the Seventh Circuit observed, this does not mean that the Tax Court can disregard the parties' agreement that a petition has been timely filed. Although litigants cannot stipulate to jurisdiction, they can agree on the facts that determine jurisdiction, the court said. According to the court, there was no reason to suspect that Tilden and the IRS colluded to establish the Tax Court's jurisdiction. To the contrary, the IRS initially argued that Tilden's petition was untimely. So, the court said, the Tax Court judge had no good reason to doubt that the envelope was handed to the Postal Service on April 21, 2015. Since the IRS later acknowledged that certified mail can take eight days to reach the Tax Court from Utah, the court found that all requirements for establishing timely filing under Reg. Sec. 301.7502-1(c)(1)(iii)(B)(1) were met.

The Seventh Circuit also doubted the Tax Court's belief that the date an envelope enters the Postal Service's tracking system is a sure indicator of the date the envelope was placed in the mail. The court noted that the IRS acknowledged that the envelope was received by the Postal Service on April 21, but yet the Postal Service's tracking date was April 23.

Although Tilden prevailed on this appeal, the Seventh Circuit was astonished that his law firm waited until the last possible day to mail the petition without an official postmark. A Tax Court petition is not a complicated document, the court observed, and could have been mailed with time to spare. And if Tilden did not hire the law firm until the 90-day period had almost run, why did the firm use a private postmark when an official one would have prevented any controversy? A staff member could have walked the envelope to a post office and asked for hand cancellation, the court noted.

The Seventh Circuit concluded that the law firm took an unnecessary risk with Tilden's money, and its own money "in the malpractice action that was sure to follow if we [the appellate court] had agreed with the Tax Court, by waiting until the last day and then not getting an official postmark or using a delivery service."

For further discussion of filing Tax Court petitions, see Parker Tax ¶263,510.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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