Posted by: Taxlitigator | November 26, 2013

“FedEx Express Saver” is NOT Valid for Filing of a Timely Tax Court Petition (or Tax Return)

Following the examination of a taxpayer’s tax return, the Internal Revenue Service (IRS) might issue a Notice of Deficiency setting forth the proposed adjustments to a taxpayers tax return and the resulting liabilities for tax, interest and penalties arising from the underlying examination.

Section 6213(a) of the Internal Revenue Code (Code) provides that, without having to first pay the amounts in dispute, a taxpayer may file a Petition with the United States Tax Court for a redetermination of the amounts set forth in the Notice of Deficiency if the Petition is filed with the Tax Court within 90 days (or 150 days if the Notice is addressed to a person outside the United States) after the date on which the Notice of Deficiency is mailed (not counting Saturday, Sunday, or a legal holiday in the District of Columbia as the last day). Importantly, the Petition must be sent to the Tax Court in Washington, D.C., not to the IRS.

Timely Mailing, Timely Filing. Code Section 7502(a)(1) contains a “timely mailed, timely filed” rule providing that if a taxpayer actually sends their Petition for delivery to the Tax Court “by United States mail” before expiration of the foregoing 90 day (or 150 day) period prescribed for filing the Petition, and the Tax Court actually receives the Petition after the foregoing time period has expired, the date of the U.S. Postal Service (USPS) postmark on the envelope containing the Petition will be considered the date of filing the Petition.

Code Section 7502(a) also applies with respect to determining the timeliness of filing “any return, claim, statement, or other document required to be filed, or any payment required to be made, within a prescribed period or on or before a prescribed date under authority of any provision of the internal revenue laws.” As such, the discussion below similarly applies to the timeliness of filing a tax return, claim for refund, etc.

If a Petition is sent to the Tax Court by USPS on or before expiration of the foregoing 90 day (or 150 day) period but is received thereafter, the filing of the Petition is deemed timely and the Tax Court has jurisdiction to hear arguments regarding the validity of the adjustments to the taxpayers return as proposed by the IRS Notice of Deficiency.

Unfortunately, however, if a Tax Court Petition is filed after expiration of the foregoing 90 day (or 150 day) period, the underlying liabilities must generally be paid and subjected to an administrative claim for refund. If the IRS denies the refund claim, litigation would only be available in either the U.S. District Court or the U.S. Court of Federal Claims (or, if appropriate, pre-payment in the U.S. Bankruptcy Court).

Limited Jurisdiction of the Tax Court. The Tax Court is a court of limited jurisdiction and may exercise jurisdiction only to the extent authorized by Congress.[1] Jurisdiction must be shown affirmatively, and the taxpayer, as the party invoking the Tax Court’s jurisdiction, bears the burden of proving that jurisdiction exists.[2] The Tax Court has no authority to extend the 90-day (or 150-day) period.[3]

Designated Private Delivery Services. Code Section 7502(f) extends the “timely mailed, timely filed” rule to certain private delivery services only “if such service is designated by the [Treasury] Secretary for purposes of” Code Section 7502(f).[4] The Treasury Secretary may designate a private delivery service only if he determines that it is at least as timely and reliable as the United States mail and that it meets other criteria specified in the statute.[5]

Almost ten years ago in Notice 2004-83, 2004-2 C.B. 1030,the IRS identified all of the approved private delivery services that have been designated by the Treasury Secretary under Code Section 7502(f).[6] Since January 1, 2005, the list of designated private delivery services is and has been as follows:

1. DHL Express (DHL): DHL Same Day Service; DHL Next Day 10:30 am; DHL Next Day 12:00 pm: DHL Next Day 3:00 pm; and DHL 2nd Day Service;

2. Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2 Day, FedEx International Priority, and FedEx International First; and

3. United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M., UPS Worldwide Express Plus, and UPS Worldwide Express.

Any other type of non-USPS, private delivery service (whether by DHL, FedEx, and UPS or otherwise) not specifically identified above is invalid for purposes of the “timely mailed, timely filed” rule set forth in Code Section 7502(f).

OOPS . . . Robert J. Eichelburg v. Commissioner. On November 25, 2013, in Robert J. Eichelburg v. Commissioner, T.C. Memo. 2013-269 (Docket No. 22837-12), Tax Court Judge Albert G. Lauber determined that the underlying Petition was filed late although it was sent before expiration of the foregoing 90 day (or 150 day) period prescribed in the Notice of Deficiency. Unfortunately, the taxpayer submitted the Petition by “FedEx Express Saver,” a private delivery service not specifically identified in Notice 2004-83. Since the Petition was not sent to the Tax Court by a specifically identified private delivery service, the mailing date of the Petition is not the date sent by the taxpayer but, instead, is the later date it is actually received by the Tax Court.

The Petition in Eichelburg was received after expiration of the foregoing 90 day (or 150 day) period prescribed in the Notice of Deficiency and the Tax Court therefore had no jurisdiction redetermine the disputed amounts set forth in the Notice of Deficiency. This very unfortunate result for Mr. Eichelberg could have been avoided had he merely sent the Petition on the same date by the USPS (hopefully by certified mail, return receipt requested) or by a private delivery service specifically identified in Notice 2004-83. 

The time for petitioning the Tax Court runs from the mailing of the Notice of Deficiency by the IRS. To be timely, the taxpayer’s Petition must be filed within the foregoing 90 day (or 150 day) period from the mailing of the Notice of Deficiency by IRS. Note that in Eichelberg, the IRS proved the timely mailing of the Notice of Deficiency by submitting a copy of USPS Form 3877, Firm Mailing Book for Accountable Mail, dated on the date of the Notice of Deficiency.

In Eichelberg, the Form 3877 listed, among the pieces received for mailing on that day, a letter with certified mail tracking number addressed to Mr. Eichelberg at his proper address. The sender is listed as IRS Detroit Computing Center, and “certified” is checked as the “type of mail or service.” In the upper right-hand corner of the Form 3877, the USPS stamped the postmark date for the Notice of Deficiency. Where the existence of a Notice of Deficiency is not disputed, a properly completed Form 3877 by itself is sufficient, absent evidence to the contrary, to establish that the Notice of Deficiency was properly mailed to the taxpayer on that date.[7]

Harsh Result. Judge Lauber acknowledged that the result in Eichelberg seemed “harsh”; that Notice 2004-83 was issued almost ten years ago; that private delivery companies have likely initiated delivery services resembling those listed in Notice 2004-83; and that many taxpayers may be unaware of the nuanced differences among such services.  However, the Tax Court may not rely on general equitable principles to expand the statutorily prescribed time for filing a Petition.[8] The Tax Court has limited jurisdiction under the “timely mailed, timely filed” rule only if a private delivery service has been “designated by the [Treasury] Secretary.”[9] Since “FedEx Express Saver” has not been designated in Notice 2004-83, the Tax Court determined that the Petition filed by Mr. Eichelberg was not timely.

[1] See sec. 7442; Naftel v. Commissioner, 85 T.C. 527, 529 (1985).

[2] See David Dung Le, M.D., Inc. v. Commissioner, 114 T.C. 268, 270 (2000), aff’d, 22 Fed. Appx. 837 (9th Cir. 2001).

[3] Joannou v. Commissioner, 33 T.C. 868, 869 (1960).

[4] Code Section 7502(f)(2).

[5] Code Section 7502(f)(2)(A)-(D); see Rev. Proc. 97-19, 1997-1 C.B. 644 (specifying criteria employed by the Secretary).

[6] The IRS Priority Guidance plan released November 20, 2013 indicates that Notice 2004-83 will be updated to add approved applicants for designated private delivery service status under Code Section 7502(f) “only if any new applicants are approved.”

[7] See, e.g., Coleman v. Commissioner, 94 T.C. 82, 90-91 (1990)

[8] See Austin v. Commissioner, T.C. Memo. 2007-11 (citing Woods v. Commissioner, 92 T.C. 776, 784-785 (1989)).

[9] Code Section 7502(f)(2).

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