Fourth Circuit Rejects Presumption of Delivery Under Common Law Mailbox Rule

(Parker Tax Publishing June 2023)

The Fourth Circuit held that a taxpayer who mailed refund claims for 2012 and 2013 to the IRS in one envelope sent via first class mail, and received a refund for 2012 but not for 2013 after the IRS said it did not receive a timely refund request for 2013, was not entitled to a presumption of timely delivery of his 2013 refund claim under the common law mailbox rule because Code Sec. 7502 supplants the common law rule and does not provide a presumption of delivery for first class mailings. However, the court remanded the case after finding that the taxpayer plausibly alleged physical delivery of the 2013 refund claim. Pond v. U.S., 2023 PTC 142 (4th Cir. 2023).

Background

In 2017, the IRS audited the 2012 tax returns for a business that Stephen Pond had invested in. Based on what they found, the IRS erroneously issued a Notice of Computational Adjustment, increasing Pond's taxable income for 2012. Under the adjustment, Pond owed additional taxes and interest for that year. He promptly paid. After paying, Pond's accountant discovered the IRS's error. Correcting for the error, Pond was entitled to a refund on his 2012 taxes and of the interest he had paid. The discovery also meant that Pond reported more taxable income than he should have for 2013 and, as a result, paid too much in taxes. So he was entitled to a refund for that year as well.

Pond thus requested a refund (1) on his 2012 taxes, (2) on his 2013 taxes, and (3) of the interest he had paid on the 2012 back payments. To request the refund on the taxes for both years, Pond claimed that he sent separate forms in a single envelope via first-class mail to an IRS center in Holtsville, New York in July 2017. Around the same time, to request the refund of the interest, Pond sent a form to an IRS center in Covington, Kentucky, which forwarded the request to an IRS center in Andover, Massachusetts.

What followed was a series of communications with the IRS that resulted in Pond getting a refund on his 2012 taxes and of the interest he paid, but not on his 2013 taxes. In a Notice of Denial, the IRS informed Pond that his 2013 refund claim was denied because it did not receive a timely refund request for that year. The denial letter listed the "date of claims received" as July 17, 2017. Pond filed a protest with the IRS Independent Office of Appeals which was rejected. Pond then took his case to a district court.

Before being repealed by the Bipartisan Budget Act of 2015, Code Sec. 6230(c)(2(A) provided that a refund claim was timely if filed within six months after the day on which the IRS mails the notice of computational adjustment to the partner. The repeal is effective for tax years beginning after December 21, 2017, and thus Code Sec. 6230(c)(2)(A) applied to Pond's 2013 claim. The IRS sent Pond a Notice of Computation Adjustment on April 26, 2017. He was therefore required to file his claim by October 26, 2017, in order for the district court to have jurisdiction.

Mailbox Rule

In general, the only way to satisfy a statutory filing requirement is physical delivery. However, the common law provides two exceptions to this rule (the common law mailbox rule). Under the narrower presumption of the common law mailbox rule, if a filer can show that the document was actually delivered, but cannot pinpoint precisely when that happened, then a court will presume that physical delivery occurred in the ordinary time after mailing. The broader presumption is of physical delivery. Courts adopting this version of the mailbox rule say that proof of proper mailing - including by testimonial or circumstantial evidence - gives rise to a rebuttable presumption that the document was physically delivered to the addressee in the time such a mailing would ordinarily take to arrive.

Courts began applying their varying versions of the mailbox rule to documents taxpayers mailed to the IRS. Against this backdrop, in 1954 Congress enacted Code. Sec. 7502, a uniform statutory mailbox rule for tax filings. The statute provides two presumptions that mirror the two common law mailbox rule presumptions. Under the presumption of timeliness in Code Sec. 7502(a), any filing sent by U.S. Mail that is received after a deadline will still be treated as timely if postmarked before the deadline. Code Sec. 7502(c) provides a broader presumption of delivery, and says that registration serves as prima facie evidence of delivery for filings sent by registered or certified mail. This delivery presumption applies only when the taxpayer uses registered or certified mail; it does not extend to first-class mail. Courts are split on whether Code Sec. 7502 supplanted the common-law mailbox rule. The Second and Sixth Circuits both say that the statute supplanted the common-law rule. The Eighth and Tenth Circuits, however, both say the statute merely supplemented the common-law rule.

Before the district court, Pond argued that (1) he was entitled to a presumption of delivery under the common law mailbox rule, and (2) even without a presumption, he plausibly alleged physical delivery of his request. The government filed a motion to dismiss. The district court sided with the government, holding that: (1) Pond could not rely on the common law mailbox rule because it was supplanted by Code Sec. 7502, and (2) Pond did not plausibly allege physical delivery. Pond appealed to the Fourth Circuit.

Analysis

The Fourth Circuit affirmed in part, vacated in part, and remanded for further proceedings. The court held that Pond could not rely on a presumption of delivery and did not satisfy the requirements of Code Sec. 7502, so he could not invoke its mailbox rule. However, the court found that Pond did plausibly allege actual physical delivery, so his claim survived the government's motion to dismiss.

The court found that Pond could not rely on the common-law presumption of delivery because Code Sec. 7502 supplanted the common law mailbox rule. In the court's view, the statute speaks directly to the same question as the common law rule. Code Sec. 7502, the court pointed out, mirrors the two presumptions that the common law rule afforded: the presumption of timeliness in Code Sec. 7502(a) and the presumption of delivery in Code Sec. 7502(c). The court found that for taxpayers, Code Sec. 7502 provides a complete, if slightly narrower, set of mailbox presumptions that supplant the common law without the need for an express statement or unavoidable conflict. Thus, Pond could not resort to the common law presumption of delivery and had to proceed under the statute. And in the court's view, Code Sec. 7502(c) makes clear when the presumption of delivery can apply to a taxpayer filing: certified and registered mailings. Because Pond did not send his 2013 refund claim by certified or registered mail, the court concluded that he did not satisfy the statute's requirements and was not entitled to a presumption of delivery.

However, the Fourth Circuit noted that Pond could still proceed if he plausibly alleged that his claim was physically delivered to the IRS. On that issue, the Fourth Circuit disagreed with the district court's holding that Pond's allegation of physical delivery was implausible. The court noted that his complaint directly alleged that the 2013 claim was physically delivered to the IRS service center in Holtsville, New York. In addition, the court found that Pond supported this assertion with three factual allegations. First, Pond claimed that the envelope was postmarked July 18, 2017, which in the court's view suggested that the document made it to its destination. Second, Pond alleged that his 2012 and 2013 claims were sent in the same envelope. The 2012 claim was paid. It was reasonable, the court said, to infer the Pond's 2012 claim to have been timely received by the IRS and if both the 2012 and 2013 claims were in the same envelope, another reasonable inference was that the IRS received Pond's 2013 claim at the same time. Third, Pond said that the letter he received from the IRS denying his 2013 claim listed the "date of claims received" as July 17, 2017. The court said that it could not ignore, in deciding whether Pond plausibly alleged timely filing, that the IRS itself prepared a document listing a timely date as the "date of claims received."

The court acknowledged that the date on the denial could have been an error but reasoned that even if so, that did not mean the IRS never received a copy of Pond's 2013 claim. The court explained that at this stage, it did not need to conduct an inquiry into why the IRS listed a timely "date of claims received." It only mattered that they did so. The court pointed out that on remand, the government may produce evidence supporting its argument that the "date of claims received" was a mistake, or to the contrary, discovery might unearth additional evidence that the 2013 claim was timely filed.

For a discussion of the mailbox rule, see Parker Tax ¶250,120.

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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