Federal Income Tax Update: Part 3
Recent Cases Involving the Mailbox Rule, Time Limits for Filing Tax Court Petitions, and Equitable Tolling for Late Filed Petitions
By Over the last few months, the Fourth Circuit Court of Appeals and Tax Court have issued several interesting decisions involving the common law mailbox rule and the limitations on the Tax Court’s jurisdiction to review and consider late filed petitions. In its recent decision in Culp, the Third Circuit Court of Appeals ruled the Section 6213(a) deadline for filing a tax court petition is procedural rather than jurisdictional. Therefore, matters of equity may toll the due date for filing a Tax Court petition.
1. No Presumption of Delivery or Filing by Regular Mail; Pond vs. U.S., 131 A.F.T.R. 2d 2023-1844 (4th Cir. 2023).
October 26 was Mr. Pond’s last day to file a refund request with the IRS. He mailed the IRS his refund claim by regular mail rather than by registered or certified mail. His first-class mail was postmarked July 18, which allowed plenty of time for Mr. Pond’s refund request to arrive at the IRS by the October 26 deadline.
The IRS denied Pond’s refund request and claimed it had no record of having received it. Mr. Pond filed suit. Because Mr. Pond did not use certified or registered mail, the IRS moved for summary judgment. Mr. Pond argued, since his letter was postmarked far in advance of the deadline, he should be entitled to the presumption of timely delivery under the common law mailbox rule.
The Fourth Circuit Court of Appeals agreed with the IRS that Section 7502 completely replaced the common law mailbox rule. Taxpayers like Mr. Pond can no longer rely on the common law presumption of delivery. Also, because Mr. Pond failed to send his refund claim by certified or registered mail, Mr. Pond could not rely on any presumption of delivery under Section 7502(c). However, since Mr. Pond alleged his refund request was physically delivered to the IRS, the IRS was denied summary judgment. The court sent the case back to the lower court to determine whether Mr. Pond can prove the document ultimately arrived at its destination, whether before or after the refund claim due date.
II. Statutory Mailbox Rule Cannot Save Late E-Filed Tax Court Petition; Nutt, 160 TC No. 10 (2023).
Mr. and Mrs. Nutt were residents of Alabama. They needed to file a Tax Court petition with the clerk’s office in Washington, DC by July 18, 2022, to protest a notice of deficiency. They e-filed their petition at 11:05 p.m. on July 18, 2022.
Since Mr. and Mrs. Nutt lived in Alabama, 11:05 p.m. Alabama (Central) time was 12:05 a.m. Eastern time on July 19, 2022. The Tax Court dismissed the Nutt’s petition since the timely mailing rule does not apply to an electronically filed Tax Court petition. Section 7502(a) clearly applies only to a document that is mailed to the IRS.
III. Tax Court Petition E-filed Eleven Seconds Late – Due to Operator Error – Is Dismissed; Antawn Sanders, 160 T.C. No. 16 (2023).
The IRS mailed a statutory notice of deficiency (a 90-day letter) to Mr. Sanders at his North Carolina residence on September 8, 2022. The notice advised Mr. Sanders his last day to file a Tax Court petition was December 12, 2022. Mr. Sanders prepared to file his petition electronically. Before December 12, 2022, Mr. Sanders set up an account to file his Petition electronically through DAWSON, which is the Tax Court’s electronic filing system.
Shortly after 11 p.m. on December 12, 2022, Mr. Sanders tried to file his petition from his phone. Mr. Sanders claimed he attempted to upload documents, but DAWSON “would not even allow [him] to click the button to upload the documents from [his] android device even after several times of login in and logging out.” Mr. Sanders ultimately filed the petition from his computer eleven seconds after midnight on December 12, 2022. At the time of filing, DAWSON automatically applied a cover sheet to the Petition stating the Petition was electronically filed and received at “12/13/22 12:00 am.” The tax court dismissed the petition declaring the period for timely filing ended at 11:59 p.m. on December 12, 2022. The IRS pointed out DAWSON logs showed DAWSON was accessible throughout the day on December 12, 2022.
The court stated electronic filing is not accomplished merely by logging into the system or beginning the filing process. As the court had held in Nutt, the Section 7502 timely mailing mailbox rule does not apply to an electronically filed petition. The court noted Section 7451(b) provides an additional remedy to taxpayers for situations such as inclement weather or an electronic filing system outage interfering with timely filing. For this purpose “inaccessibility” does not include user error or technical difficulties on the user’s side. See, e.g., In re Beal, 616 B.R. 140.
IV. Section 6213 Deadline for Filing Tax Court Petition is Procedural Rather than Jurisdictional so Equitable Tolling can Save a Late-Filed Petition; Culp vs. Commissioner, 2023 U.S. App. LEXIS 18287 (2023).
Mr. and Mrs. Culp were late in filing their Tax Court petition. The court dismissed the petition on the basis that the court lacked jurisdiction due to the time deadlines in Section 6213(a). The Third Circuit Court of Appeals determined the Section 6213(a) deadline is not jurisdictional but instead is a statutory deadline that is claims processing in nature. That means the principles of equity can toll the deadline for filing a petition. The Court of Appeals remanded the case to the Tax Court to determine whether the Culps qualified for equitable tolling relief.
Keith Wood is an attorney with Carruthers & Roth, P.A. in Greensboro.