Court Petition Was Validly Postmarked Before Filing Deadline Using Non-USPS Label

(Parker Tax Publishing December 2017)

The Tax Court held that it had jurisdiction over a petition it received seven days after the last day for filing because it was timely filed using postage prepaid through Stamps.com, an online postage services provider. The Tax Court followed Tilden v. Comm'r, 2017 PTC 17 (7th Cir. 2017) in holding that the envelope bearing the Stamps.com label, which it found was a postmark not made by the United States Postal Service (USPS), was timely mailed under Code Sec. 7502 because it was dated before the last day for filing and was received by the Tax Court no later than the time it would ordinarily be received if postmarked by the USPS. Pearson v. Comm'r, 149 T.C. No. 20 (2017).

Background

On January 22, 2015, the IRS sent Lincoln and Victoria Pearson a notice of deficiency for tax years 2010, 2011 and 2012. The notice determined deficiencies totaling over $80,000. Under Code Sec. 6213, the deadline for the Pearsons to file a Tax Court petition challenging the deficiency was April 22, 2015 - 90 days after the mailing of the notice. The Tax Court does not have jurisdiction over a petition filed after the deadline.

An administrative assistant at the law firm representing the Pearsons mailed their petition using a postage label from Stamps.com, an online postage services provider. The label showed a date of April 21, 2015, which was the date the label was created. However, the earliest entry in the USPS's online tracking system showed the envelope arriving at a USPS facility on April 23, 2015. A USPS specialist said that the envelope was most likely deposited at the post office in the afternoon of April 22, 2015. The Tax Court received the petition on April 29, 2015.

Code Sec. 7502(a) provides that the date an envelope is postmarked is treated as the date of delivery. The Pearsons therefore needed only to postmark their petition by April 22 to meet the deadline. Under Code Sec. 7502(b), if a postmark is made other than by the USPS, it must comply with the regulations under that section.

Under Reg. Sec. 301.7502-1(c)(1)(iii)(B)(1), a non-USPS postmark must be legibly dated on or before the last day for filing, and the Tax Court must receive the mailing within the time it ordinarily takes for a USPS-postmarked package to arrive. If the non-USPS postmarked item is received late, then Reg. Sec. 301.7502-1(c)(1)(iii)(B)(2) treats it as being timely filed if the sender can prove it was deposited in the mail on or before the filing deadline. Under Reg. Sec. 301.7502-1(c)(1)(iii)(B)(3), if the envelope has both a USPS and a non-USPS postmark, the non-USPS postmark is disregarded and the USPS postmark is treated as the date mailed and filed.

The IRS filed a motion to dismiss the Pearsons' petition for lack of jurisdiction. The Tax Court delayed ruling on the motion pending the outcome of a Seventh Circuit appeal of its decision in Tilden v. Comm'r, T.C. Memo. 2015-188, a case involving the same law firm that represented the Pearsons and with virtually identical facts.

In Tilden, the Tax Court held that the USPS tracking information was a postmark. It therefore decided under Reg. Sec. 301.7502-1(c)(1)(iii)(B)(3) that there were competing postmarks and the Stamps.com postmark should be disregarded. Because the earliest date of the tracking information was April 23, 2015, the day after the deadline, the Tax Court concluded that the petition was not timely filed. The Seventh Circuit reversed, finding that the Stamps.com label was the only postmark on the envelope and that it met the requirements for a timely filed non-USPS postmark under Reg. Sec. 301.7502-1(c)(1)(iii)(B)(1).

After the Seventh Circuit's reversal in Tilden, the IRS joined the Pearsons in urging that the Tax Court deny its motion to dismiss for lack of jurisdiction. The IRS concluded that the petition was most likely deposited with the USPS on April 22, which was within the time prescribed by Code Secs. 6213 and 7502(b).

Analysis

The Tax Court adopted the Seventh Circuit's reasoning in Tilden and held that the Pearsons' petition was timely filed using the Stamps.com label as a non-USPS postmark. The Tax Court acknowledged that the date on a Stamps.com label does not mark the package's entry into the post but indicates only the date the label was created. But it joined the Seventh Circuit in finding that the Stamps.com label is a postmark not made by the USPS. The Tax Court noted that the IRS had conceded the Pearsons' petition was timely mailed and reasoned that the IRS's construction of its own regulations was entitled to deference.

The Tax Court found nothing in the legislative history of Code Sec. 7502(b) or in the regulations to suggest that a Stamps.com postage label, or one like it, should be regarded as something other than a non-USPS postmark. The Tax Court reviewed several of its own decisions holding that a stamp created by a private postage meter qualifies as a non-USPS postmark, and adopted the reasoning in Tilden that a Stamps.com postage label is the modern equivalent of the output of a postage meter. The Tax Court found no basis for distinguishing between these two means of affixing postage.

The Tax Court then found that under Reg. Sec. 301.7502-1(c)(1)(iii)(B)(1), the Stamps.com postmark had a legible date (April 21) which was on or before the last day for filing (April 22). And, because the IRS acknowledged that certified mail often takes eight days to reach the Tax Court from Utah, the Pearsons' petition, which was received on April 29, arrived no later than the time when a document would ordinarily be received if postmarked by the USPS. It therefore met the requirements for a timely filing using a non-USPS postmark.

The Tax Court also determined that the Pearsons' petition was timely under Sec. 301.7502-1(c)(1)(iii)(B)(2). The Tax Court found that the Pearsons' envelope was deposited in the mail either on April 21 or 22; in either case, it was timely filed under Reg. Sec. 301.7502-1(c)(1)(iii)(B)(2). Finally, the Tax Court reiterated that because there was no USPS postmark, there was no issue of competing postmarks and Reg. Sec. 301.7502-1(c)(1)(iii)(B)(3) did not apply.

Observation: In a dissenting opinion, two judges challenged the majority's conclusion that a postage label printed by an individual customer on his own printer using an internet vendor like Stamps.com, and placed by the individual on his own piece of mail, constitutes a non-USPS postmark. The dissenters reasoned that the rules for non-USPS postmarks were intended to apply to postage meters and that the majority failed to explain in what sense Stamps.com might be the equivalent of a postage meter. The dissenters also argued that the majority failed address whether an item postmarked using Stamps.com was required to be mailed the same day that the label was created, which it said was the basis for treating a stamp from a postage meter as a postmark.

For further discussion of when a tax return or Tax Court petition is considered timely filed, 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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