Tax Court Update: What is a Postmark? by Jonathan Kalinski
My colleagues and I have spent hours discussing the best way to mail time sensitive documents such as a Tax Court petition, tax return, and refund claim. FedEx or U.S. Postal Service, Certified Mail or Overnight or Personally Stamped Green Card[i] or not. Consider this the tax lawyer equivalent of Brady or Manning (Brady), The Beatles or the Stones (The Beatles), and Hammett or Chandler (Chandler).
Although it might seem trivial, and often is, the mail discussion is important and can have dire consequences if you don’t follow the rules. The Tax Court is a court of limited jurisdiction, and if you do not timely file your petition, you won’t get to Tax Court and may be stuck with a large tax liability.
In a Pearson v. Commissioner[ii], a Court Reviewed opinion, a divided Tax Court followed a recent 7th Circuit case and overturned its own precedent in holding that a Stamps.com postage label is a “postmark not made by the United States Postal Service.” In a rare occurrence, the IRS supported the Court finding for the Taxpayer and holding that it had jurisdiction.
The last day to mail the petition in this case was April 22. The Tax Court received and filed the petition on April 29. The envelope had a Stamps.com label with a date of April 21, and a USPS Certified mail tracking number whose earliest entry signified arrival at the USPS facility on April 23. An employee of the law firm who mailed the petition submitted a declaration that she actually mailed the petition on April 21.
Under IRC §7502, a petition is treated as timely even if the Tax Court files it after the 90th day if it was timely mailed. This is the mailbox rule. The mailbox rule only applies if you use a proper mailing service such as the U.S. Postal Service or a designated private delivery service like FedEx and UPS (and use the designated delivery types, e.g. not UPS Ground).
IRC §7502(b), allows for regulations regarding postmarks not made by USPS. Those regulations stated that if a postmark is made other than by USPS, the postmark must bear a legible date on or before the last date, and that the document must be received by the agency not later than the time when a document sent by the same class of mail would be received if sent by USPS.
In Tilden v. Commissioner[iii], the Tax Court disregarded the Stamps.com label as postmark and used the USPS tracking data to hold the petition was not timely. The 7thCircuit reversed. The Tax Court now follows the 7th Circuit’s holding in Tilden in this case that would be appealable to the 8th Circuit. By holding that the Stamps.com label was a postmark not made by USPS, the question became whether the document arrived in the time that it would have arrived if mailed by USPS. The parties, and the Court, agreed that it did. As a result, the petition was timely.
In a concurring opinion, Judge Buch writes that, “as technology evolves, so must the law. But the law must evolve in a manner that is consistent with the statutes as written by Congress.” He goes on to discuss the evolution of mailing options, including those offered by USPS. Two judges dissented in the opinion arguing that “a postage label printed by an individual customer on his own printer through the means of an internet vendor and placed by himself on his own piece of mail” should not constitute a postmark not made by the USPS.
Going to the post office can be inefficient and a hassle. Technology has dramatically improved this, but you need to be sure your firm is using a method that is reliable and won’t get your clients (and you) in trouble.
There are probably several lessons in this case. One, how to mail a document should not be an afterthought because the wrong way will have dire consequences. Second, as a practitioner, if you can, try not to rely on the mailbox rule. The 7th Circuit in Tilden cautioned against waiting until the last day. You, your client, and your E&O carrier, will all sleep easier. As the case notes, using USPS certified mail from Salt Lake City, UT to the Tax Court in Washington, DC can take eight (8) days. The Tax Court also irradiates its mail, which can cause further delay in actually filing your petition. Spare the heartache and use a proper overnight delivery method such as FedEx Priority Overnight or UPS Next Day Air. You will know that your package has arrived the next day. The list of approved private delivery services can be found at https://www.irs.gov/filing/private-delivery-services-pds. This list changes so be sure that the method you are using is approved at the time of mailing.
[i] Formally known as PS Form 3811.
[ii] Pearson v. Commissioner, 149 T.C. No. 20 (2017).
[iii] Tilden v. Commissioner, 846 F.3d 882 (7th Cir. 2017), rev’g and remanding T.C. Memo. 2015-188.