The case of Park v. Commissioner, Dk. No. 3312-22S shows a bias in the Tax Court’s electronic filing system that disadvantages petitioners in time zones to the west of Washington, D.C. Think of the Park decision as the Tax Court’s equivalent of the View of the World from 9th Avenue. It also serves as a reminder of Tax Court practices we have discussed before regarding the policing of cases to determine timeliness discussed here and here, as well as burdens placed by the IRS on electronic tax return filers we have discussed previously here and here. The Parks, who live in California, have their Tax Court case dismissed even though they filed on the 90th day viewed from the lens of California. It is dismissed because it arrived at the Tax Court two minutes after the East Coast based deadline. Let’s look at the facts in more detail.
read more...The IRS sent the Parks a notice of deficiency (SNOD) on November 29, 2021. The Court says that the SNOD stated the last date to file the petition was February 28, 2022. Note that 90 from November 29 would be February 27. In 2021 February 27 was a Sunday moving the last date to file to Monday, February 28 pursuant to IRC 7503.
The court states the petition was filed on Tuesday, March 1, 92 days after the mailing of the SNOD. In this case, the Court finds that the filing occurred one day after the last date to file the petition.
After the filing of the petition, the IRS answered the case on April 25, 2022, within the 60-day time period for filing an answer. The parties submitted a proposed stipulated decision on May 11, 2022, which would have resolved the case. The timing of the proposed stipulated decision suggests that the petitioners convinced the respondent very quickly that the notice was wrong. It’s possible that the IRS convinced petitioners that quickly that the notice was right, but in my experience, cases that settle this quickly usually do so because the petitioner provides information that immediately convinces the Chief Counsel attorneys that they do not owe the tax shown on the SNOD. Kudos to the Chief Counsel attorneys for working the case so quickly acknowledging the proper result.
The Tax Court initially filed the stipulated decision but later struck it from the docket and, seven months later, on December 11, 2022, issued an order to show cause why the Court should not dismiss the case for lack of jurisdiction. I don’t know the issue in this case because I have not ordered the documents, but if this were a case in which taxpayers were receiving a refund note that the refund would have been held by the IRS, awaiting the signature of the judge on the decision document. Because the stipulated decision was filed almost immediately after the answer, this case would be on the Court’s general docket, unassigned to a specific judge, and under the office of the Chief Judge.
The parties responded to the order by the end of December. On February 22, 2023, nine months after the parties had reached an agreement in this case, the Court dismissed it. Assuming I am right that the IRS agreed that the taxpayer did not owe the amount set out in the SNOD, the dismissal will not cause the taxpayer problems. The IRS will honor the agreement, which means it will not make an assessment of the deficiency proposed in the SNOD, and it will pay a refund if any is due. So, the taxpayer in this situation will not be harmed by the dismissal.
Why did the court dismiss the case? Under its interpretation of its jurisdiction, whether that’s 6213 or 6214, depending on the judge, the taxpayer must file a timely petition, and the court must dismiss an untimely filed case even where the parties have reached an agreement. The Court explains why it views this petition as late:
On December 30, 2022, petitioners filed a Response to Order to Show Cause, in which they argue that the petition was filed at 12:01 a.m. on March 1, 2022, and the Court should consider that the petition was submitted from the State of California at 9:01 p.m. on February 28, 2022. In addition, Petitioners also argue that they last saved the petition at 8:54 p.m. on February 28, 2022, to their computer and the petition was likely submitted by them before the petition was received by the Court.
In pertinent part, the Court’s DAWSON Petitioner Training Guide, at page 10, states, “The Court MUST receive your electronically filed Petition no later than 12:59 [sic] pm Eastern Time on the last date to file. Petitions received after this time are considered untimely and your case may be dismissed for lack of jurisdiction.” A copy of the DAWSON Petitioner Training Guide is posted in the Rules & Guidance section of the Court’s website at www.ustaxcourt.gov.
The Court’s quote from page 10 of its guide contains a misstatement. The guide says the electronic petition must be received not later than 11:59 pm Eastern Time. Notice that the petition must be received by that time. It’s not the time the petitioner sends the petition. I have never checked to see if there was a difference between the time I sent a document to the court and the time the court received it. The docket sheet does not record time down to the minute but lists the day. The “farm” internet I have is quite slow, and sometimes I think documents I send to others or that others send to me are sent by the electronic equivalent of the Pony Express rather than going and coming instantaneously.
I would certainly never recommend waiting until almost midnight on the day a petition is due in order to transmit a petition for numerous reasons. The electronic submission rule adopted by the Tax Court, however, disadvantages all petitioners who do not live on the East Coast. This rule is not required by the statute or at least not facially required. The Park case is not a good case to challenge this rule, but even if Hallmark correctly states the Tax Court’s jurisdiction regarding timeliness, the Tax Court’s electronic filing rule might not stand up to a challenge based on jurisdiction.
So, the Parks filed two minutes late. The Tax Court took seven months to bring this to the parties’ attention. If the time period is not jurisdictional, the Court does not have to police its docket filings down to the minute. It might still find the Parks lacked a good excuse for filing two minutes late and dismiss their case, but it would only do so if the IRS raised the issue. Is this the way we want the Tax Court to spend its time and the time of the parties?
Is this the way we want to treat taxpayers west of the Eastern Time Zone? The Tax Court wants to promote electronic filing. Kicking out a petitioner who may or may not have transmitted the document before 9:00 PM Pacific Time does not seem like a way to promote electronic filing of petitions. The Tax Court did not choose this rule because it is East Coast centric. It did so to avoid petitioners and practitioners on the East Coast playing games and getting extra time to file based on the time zones in the western United States that can be several hours after the deadline in the east.
I don’t know if the Court has the IT capability to know the time zone from which a petition is submitted or if it would be comfortable requiring a statement from the petitioner regarding that time zone. A petitioner on the East Coast could get extra time by electronically transmitting the petition to a friend in Hawaii and having them go to the post office or an approved private delivery service and getting the petition date stamped before the end of the 90th day.
Petitioners need to check to make sure their electronic transmission has appeared on the Court’s docket, but documents are not immediately posted there. It can, at times, take days before a document is posted. What if the Parks transmitted their petition on February 25, 2022, but something in the electronic transmission on their end, the Court’s end, or somewhere in between held up its receipt until March 1? Under the electronic filing rules, the Court would dismiss their case.
Unlike the electronic filing of a tax return, where you generally get a ping back within a day, (and are given a grace period to perfect a rejected return and still have it treated as timely) it can take longer for a petition to appear as docketed, and the “ping back” that it has been accepted is the docket entry if it is accepted. This has similarities to the problems the IRS creates when it penalizes taxpayers who timely file electronic returns, but something goes wrong in the transmission and their preparer does not inform the taxpayer of the problem, potentially creating large penalties.
Park’s wasteful dismissal order happened last week. Last week was a 4-day week. But, Park was not alone that week. There were three other cases in which the parties had submitted stipulated decisions only after which the court raised the question of late filing and where the court eventually dismissed the cases for lack of jurisdiction. Markle, Docket No. 37736-21 (2/24/23); Bozarth, Docket No. 10767-20 (2/24/23); Radu, Docket No. 12322-22S (2/23/23). And, even just this morning, there was another such case. Berning, Docket No. 22330-22S.
Today, Feb. 28, the Tax Court dismissed another deficiency case for lack of jurisdiction for late filing after the parties had submitted a proposed stipulated decision. Brown, Docket No. 11247-20S.
If this issue does not soon get clarified one way or the other (and maybe even if it does), then it is not difficult to imaging potential problems impacting taxpayers who are aboard the International Space Station or, worse yet, on a NASA or privately-promoted mission to Mars.
Closer to home, I flew Concorde from Europe to NY three times and arrived “before I left.” That is no longer available.
There is no good answer if one needs to cover every possibility. Even consistency may be impossible.
I remember the “good old days” when changes to the Code or Regulations would be made effective at the beginning of the following year, and there was a story floating around that one tax lawyer billed over 24 hours on Dec. 31 because he had been told to take a bunch of files to complete before the law changed and fly first to the west coast and then to Hawaii to give himself as much to do as many as possible.
If the deadline is plainly stated, having a few hours less on the last day is hardly unfair; indeed, the relatively fewer US taxpayers in Europe or Asia have more time viewed from a local perspective.
But . . . one occasionally finds US Post Offices open all night; had the California taxpayer sent the document by old-fashioned mail from one of those, it would have been timely even after midnight in DC. Because that is the case, it is arbitrary and capricious for the Tax Court to make electronic filing hinge on east coast time. (Not arbitrary and capricious to require that it be received, not just sent, by a deadline; the taxpayer is at risk for delays in the system other than for USPS.) The court could decree that it must be received before midnight in the time zone where the taxpayer is resident; that would eliminate questions of sending it from elsewhere.
And then there is the case of Joseph Jacintho of Maui, Hawaii, whose petition was received on February 24, 2022. As Judge Choi explained in asking the parties why the case should not be dismissed for lack of jurisdiction, “it was seen that the last date for petitioners [sic, there is only one] to file a petition with the Court was February 22, 2022. The envelope that the petition was sent in does not appear to bear a legible postmark of the date sent and checking the certified mail tracking number on the envelope only provides the tracking history from when it arrived at the Washington D.C. Post office, not the date it was mailed. Therefore, it appears that the petition was not timely filed with the Court.”
The proposed dismissal came on November 28, less than two months before the case was calendared for trial at a January 17, 2023, Standalone Remote trial session. The docket number is 4718-22S.
Happily, both Mr. Jacintho and IRS filed responses in late December that convinced the Court to discharge the order to show cause, and enter a stipulated decision on January 5, 2023. Unfortunately, we don’t know from the online documents what magic words were needed to prove that certified mail always requires at least two days to arrive from mid-Pacific to just below the Falls of the Potomac.
My understanding is that DAWSON involves a direct packet of electrons from the sender’s computer to the Tax Court’s computer, at more or less the speed of light. This differs from the common misconception that electronic filing of tax returns is accomplished through a direct connection with IRS computers. The electrons are first reviewed by software vendors in the private sector, like Intuit or the European-based Wolters-Kluwer. Only when they comply with all the protocols are they forwarded to the government.
I found this in Rule 6 of the Rules of the U.S. Court of Federal Claims:
(4) “Last Day” Defined. Unless a different
time is set by a statute or court order, the
last day ends:
(A) for electronic filing, at midnight in
the Eastern Time Zone;
UTC -12:00 (Howard and Baker Islands) is also known as AoE (Anywhere on Earth). This standard began with the standardizers themselves, who needed a single, but hard to mistake (and impossible to mistake in the direction of leniency) deadline for their electronic balloting.
Perhaps the Tax Court could set its deadlines to Howard and Baker Islands (which are after all American) e.g. February 28 Anywhere on Earth, or to Hawaii, the westernmost area of its jurisdiction, instead of to Washington, D.C., its own physical location. The virtue would be avoiding this misunderstanding (although the law seems clear and straightforward enough to expect someone filing a legal case to understand) and, more importantly, avoiding that familiar problem of a rule for electronic filing that’s less lenient than paper! In neither case is there really an issue of “bias” per se.