Taxpayers who are issued a notice of deficiency by the Internal Revenue Service (“IRS”) have ninety (90) days from the date such notice of deficiency is mailed to file a petition with the Tax Court for a redetermination of the deficiency.[1] Last year, the Tax Court dismissed several cases for lack of jurisdiction when the taxpayer failed to file within the ninety-day deadline. A few of these cases illustrate the importance of timely filing a petition, and perhaps even giving a cushion for error when doing so. As provided further below, even good excuses will not prevent an untimely filed petition from being dismissed.
Nguyen v. Commissioner[2]
Section 7502(a) establishes the general principal of “timely mailed is timely filed.” Specifically, Section 2502(a)(1) provides that for federal tax documents, the date of the United States postmark in which such document is mailed is deemed the date of delivery, even if the document is received after the postmark date. In Nguyen, however, the Tax Court’s holding turned on not when the petition was mailed, but rather which mail carrier was used to mail the petition.
Section 2502(c) provides that if federal tax documents are sent by “United States registered mail,” such registration shall be evidence that the document was delivered to the agency, officer, or office to which it was addressed,[3] and the date of registration is deemed the postmark date.[4] Section 2502(f) goes on to broaden the definition of “United States mail” to include a reference to any “designated delivery service,”[5] and a “designated delivery service” is any such service designated by the Secretary as such, provided that such service meets a certain criteria, such as being available to the general public and being as timely and reliable as United States mail.[6]
The IRS subsequently issued Notice 2016-30, which designated private delivery services considered equivalent to the United States mail and a “designated delivery service” for purposes of Section 7502. The private delivery services so designated were all associated with FedEx, UPS, or DHL. Those associated with FedEx (and relevant in the Nguyen case) include FedEx First Overnight, FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2-Day, FedEx International Next Flight Out, FedEx International Priority, FedEx International First, and FedEx International Economy. Namely excluded from this list is the service used by the taxpayer in Nguyen, FedEx Ground.
The taxpayer’s petition was filed only one day after the expiration of the ninety-day filing period. In argument against the IRS’s motion to dismiss, the taxpayer asserted his petition was timely mailed and thus timely filed. While the taxpayer conceded that FedEx Ground was not enumerated as a designated delivery service under Notice 2016-30, he argued that FedEx Ground was substantially similar to FedEx 2-Day, a designated delivery service, which should permit him to assert the timely mailed, timely filed rule.
Unfortunately for the taxpayer, the Tax Court disagreed. While conceding that FedEx Ground and FedEx 2-Day may in fact be substantially similar, the Court found it “may not rely on general equitable principles to expand the statutorily prescribed time for filing a petition…. Our hands are tied. We are not at liberty to make a designation that Congress has explicitly committed to the Secretary’s discretion.” The Tax Court did seem to show some sympathy for the taxpayer, giving him other avenues available for him to pursue for remedy in its opinion. Despite this sympathy, the Tax Court here, as well as other cases, has shown its interpretation of Section 7502 as strictly jurisdictional and not subject to any equitable tolling, no matter the genuineness of the reason for untimely filing.
Electronically Filed Petitions and the Deadline
A taxpayer could avoid the problems found in Nguyen by electronically filing their petition; however, recent cases have shown even electronic filings can be deemed untimely filed due to minor oversight. In Nutt v. Commissioner,[7] the taxpayers issued a notice of deficiency and were required to file a petition with the Tax Court no later than July 18, 2022. Taxpayers electronically filed their petition on July 18 at 11:05 PM in Alabama (Central Time), where they resided. The Tax Court’s filing system, however, indicated it received the petition at 12:05 AM, as the Court is located in Washington, D.C. (Eastern Time). Under the Tax Court rules, electronic filings, “will be considered timely filed if it is electronically filed at or before 11:59 P.M. eastern time, on the last day of the applicable period for filing.”[8] As the case was in Nguyen, the Court dismissed the taxpayer’s case for lack of jurisdiction due to an untimely filed petition.
In another case, Sanders v. Commissioner[9], the taxpayer filed his petition exactly eleven seconds after midnight of the required filing date of the petition. The taxpayer alleged that while he was filing the petition on his computer, he experienced technical difficulties and was forced to submit the petition from his phone, resulting in his eleven seconds of tardiness. Despite missing the deadline by mere seconds, the Tax Court again dismissed the taxpayers case for lack of jurisdiction due to an untimely filed petition.
A Case in Favor of Taxpayers
In Culp v. Commissioner,[10] the Third Circuit reversed a Tax Court order dismissing the case for lack of jurisdiction and remanded to the Tax Court to find whether the taxpayer deserves equitable tolling. In this significant case, the Third Circuit went against established precedent, finding that the ninety-day period was not jurisdictional and was thus subject to equitable tolling.
The court stated that previous precedent was nothing more than “drive-by jurisdictional rulings” which were entitled to no weight in their opinion. Following the Supreme Court’s holding in Boechler[11], which states that Congress must make a “clear statement” in the relevant statute that the deadline is jurisdictional. The Culp Court found no such clear statement in Section 6213(a), stating, “[Congress] expressly constrained the Tax Court from issuing injunctions or ordering refunds when a petition is untimely. But it did not similarly limit the Tax Court’s power to review untimely redetermination petitions.” It remains to be seen how the Third Circuit’s decision will play out going forward, but it does provide a glimmer of hope to taxpayers that there is a possibility some equitable tolling may be applied, rather than the strict dismissals illustrated in the previous paragraphs.
Conclusion
While the Culp decision should provide some optimism to taxpayers (at least those in the Third Circuit) going forward, until the matter of Section 6213(a)’s nature of jurisdictional or not goes before the Supreme Court for decision, taxpayers should learn from the innocent mistakes of the taxpayers whose petitions were dismissed despite barely the deadline or legitimate excuses. When filing a petition with the Tax Court, consult with a tax professional to ensure your petition is timely filed.
[1] I.R.C. Section 6213(a).
[2] Nguyen v. Comm’r, T.C. Memo 2023-151.
[3] I.R.C. Section 7502(c)(1).
[4] I.R.C. Section 7502(c)(2).
[5] I.R.C. Section 7502(f)(1).
[6] I.R.C. Section 7502(f)(2).
[7] Nutt v. Comm’r, 160 T.C. No. 10 (2023).
[8] Rule 22(d).
[9] Sanders v. Comm’r, 160 T.C. No. 16 (2023).
[10] No. 22-1789 (3d Cir. 2023).
[11] Boechler, P.C. v. Comm’r, No. 20-1472. Held that the thirty-day period to petition for review of an IRS Independent Office of Appeals’ decision is not a jurisdictional deadline and subject to equitable tolling.
