Today guest blogger Bryan Camp discuses the implications for tax procedure of the new federal holiday celebrating Juneteenth. National recognition of Juneteenth resulted from a years-long campaign by many including the incredible 94-year old activist and survivor of white supremacist violence Opal Lee. Christine
Yesterday, President Biden signed legislation that made June 19th a federal holiday. It’s the first new federal holiday since President Reagan signed on to the creation of Martin Luther King Day back in 1983.
The new holiday means paid time off for some. Certainly all federal workers will get it, and other workers, too, to the extent one’s employer automatically pegs paid holidays to the federal calendar.
But the first thought for tax procedure nerds is, of course, IRC §7503. That statute provides that when any deadline for performing “any act” required under “this title” falls on Saturday, Sunday, or a “legal holiday,” why then “the performance of such act shall be considered timely if it is performed on the next succeeding day which is not a Saturday, Sunday, or a legal holiday.” The Tax Court piggybacks off of this rule, saying that §7503 also applies to deadlines for Tax Court petitions. TC Rule 22.
read more...Section 7503 will apply to the new holiday just like it applies to others. This year, for example, June 19th falls on a Saturday. The enacting legislation says that when that happens, the holiday will be celebrated on the preceding Friday, June 18th. And THAT means that June 18th is now a legal holiday, so §7503 acts to defer any act due today until Monday, June 21st. I have not read the legislation, but I am guessing that when June 19th falls on a Sunday, the holiday will be celebrated on the next day, Monday. After all, we cannot let holidays go to waste.
Let’s call that the 3-day weekend rule!
This is also a good moment to review a couple of other quirks about §7503 associated with the statute’s definition of “legal holiday.” Surprisingly, the term is not defined to mean a federal holiday, at least not directly. Let me explain.
The term encompasses two types of holidays. First, the term means any federal holiday. Technically, the statute actually says that the term just refers to “a legal holiday in the District of Columbia.” However, since DC is currently under federal jurisdiction that statutory definition means that any federal holiday is a “legal holiday.”
One quirk involving this definition is that DC celebrates a holiday called “Emancipation Day.” That day is supposed to fall on April 16th but the enacting legislation also contains a 3-day weekend rule. The result is that when April 15th falls on a Saturday, that means that Monday April 17th is a legal holiday in DC, which means that §7503 kicks in and pushes the April 15th filing date to April 18th. That is what happened in 2017 for tax year 2016 returns.
The second type of holiday that triggers operation of §7503 is trickier to figure out. It provides that when any act is required “to be performed, at any office of the Secretary or at any other office of the United States or any agency thereof, located outside the District of Columbia but within an internal revenue district” then the term “legal holiday” also means “a Statewide legal holiday in the State where such office is located.”
One example of a statewide legal holiday that sometimes affects the April 15th filing deadline is the Patriots Day holiday. No, it’s not about the sports team. It is designated to be celebrated on the third Monday in April (so no need for a 3-day weekend rule). Several states have that day as a statewide holiday.
So what happens when the third Monday in April is the 15th, 16th, or 17th (do you see why it matters that it falls on the 16th or 17th?). So far, the IRS has taken the position that only those taxpayers who live in the states that celebrate the holiday can use §7503, to push their filing deadline to Tuesday, even if they are required to file in an IRS Campus that is not in a state celebrating that holiday. See IRS Notice 2006-23. That does not make much sense to me. The statutory language would appear to key the effect of a statewide holiday to whether the IRS office where a document must be filed is in the state, not where the taxpayer required to file happens to live. Thus, because there is a a returns processing center in Andover Massachusetts, a state that observes Patriots Day, then §7503 should apply to all taxpayers required to file in Andover.
Section 7503 is woefully outdated. The reason for the two separate definitions was that in the old days, taxpayers filed their returns in local offices but much of the processing and assessment work was done in Washington D.C. And when I say “the old days” folks, I mean the really old days, before the introduction of the Computing Centers and centralized returns processing in the early 1960’s! That’s how outdated the language is.
Further, alert readers will also notice that the statute refers to “internal revenue districts.” They no longer exist. They were abolished by the 1998 IRS Restructuring and Reform Act. But did Congress think to change the language in §7503? Noooooo. So we just stumble along, applying outdated statutory language to new situations as best we can. Thankfully, the creation of a new federal holiday fits very nicely within the definition of “legal holiday” contained in §7503. ….until D.C. achieves statehood.
Not so fast with this “paid time off” thing!!!
Once upon a time, there were two “paid time off” legal holidays in February, to wit: Lincoln’s Birthday (12 February) and Washington’s Birthday (22 February). But with the advent of Martin Luther King Day, the two February holidays were rolled into one, Presidents’ Day.
Federal holidays have often been given when budgetary considerations precluded giving Federal employees a raise for the year. They often had political implications as markers for certain constituencies. Think all of the New England soldiers who fought in the Civil War getting Thanksgiving Day, the Italian-American voters getting Columbus Day, and, of course, the military veterans getting Veteran’s Day.
But, as I recall, when Martin Luther King day was placed on the calendar, the Federal employees not only did not get a raise, but we didn’t even get another “paid time off” day, while the political lagniappe was given to the African-American constituencies.
I’m not aware of any returns that get filed at Andover these days. Juneteenth happens to be the date that Fresno closes for 1040 receipts, and Ogden takes over its work. IRS seems to have a preference for red-state locations, these days.
Thank you for your post. I suppose I may not be faced with pondering the interplay of holidays under the D.C. Code as compared to those in the USC until such time that another holiday is federally enacted just hours before its first observance. But it lead to some observations that might not be as readily apparent for those of us in business who needed to make a quick decision, such as whether to initiate an ACH credit payroll deposit on Thursday to settle on Friday (and well after the days of making now-retired Federal Reserve deposits at the physical counter of a bank with its own hours of operation).
IRS Pub 509 (2001) quotes the code language “means any legal holiday in the District of Columbia”. And, without yet becoming familiar with Winkler on this weekend following the literally last-hours enactment, the code language on its face points to the type of exclusive definition that “means” connotes. And so it appeared that the situation was one where the D.C. Code does not yet reflect Juneteenth such that it is not a holiday for federal tax purposes. (I could not find where the D.C. Home Rule empowers the mayor to declare a holiday.) The situation in Winkler seems quite analogous to the Juneteenth enactment situation. I also note that the tie-in to the D.C. Code’s list of holidays, going so far as to cite the section number, is in the Treas regs; however, there (and not noted by this post reader until your post caused me to consider further), the language is “including” rather than “means”. Was this an administrative fix that may have exceeded authority given that “means” is not ambiguous? I note that it was the IRS arguing that the changed federal date of observing Washington’s birthday had not yet made its way to the D.C. Code in Winkler, and lost. Presumably they won’t be making the same argument this time around?