Les and I each wrote short, essentially follow up posts which we are combing into one. We anticipate we will be writing more on mailing deadlines and on the APA impact on notices. Keith
Using Private Carriers to Meet a Filing Deadline
In Notice 2016-30, IRS published a new list of designated private delivery services (“designated PDSs”) for purposes of the timely mailing treated as timely filing/paying rule of section 7502. The Notice provides rules for determining the postmark date for these services. The Notice updates Notice 2015-38, which had updated Notice 2004-83. This marks the second time IRS has updated the rules in under a year after an eleven or so year run for the original notice.
The main change is that the notice, effective April 11, 2016, adds to the acceptable list a number of DHL-provided services. IRS dropped DHL in last year’s following DHL’s cutback in services.
The Notice reminds people that not all services offered by the anointed carriers qualify as PDS’s. We have discussed numerous times issues taxpayers and practitioners have had meeting petition deadlines. Failing to track which services qualify can have major consequences. Keith has discussed the sad case of Guralnik v Commissioner when the taxpayer used FedEx First Overnight to mail his petition, a service not found within the 2004 notice but one IRS added in 2015. In addition, a summary opinion from a couple of years ago, Sanders v Commissioner, involved a pro se taxpayer who sent in his petition on day 89 using UPS Ground. UPS Ground was then and is still not one of the many UPS services that the IRS treats as a PDS.
In Sanders, the petition arrived at Tax Court after the 90-day period elapsed. IRS moved to dismiss, and the Tax Court held that the petition was untimely “because UPS Ground has not been designated by the Commissioner as a private delivery service.”
Addressing the consequences the Tax Court added:
In so holding we acknowledge that the result may appear harsh, notwithstanding the fact that petitioner had nearly 90 days to file his petition but waited until the last moment to do so However, the Court cannot rely on general equitable principles to expand the statutorily prescribed time for filing a petition.
The Tax Court concluded that Sanders was not without recourse; he could pay the tax and file a refund claim and suit. Given that he deficiency was for two years and totaled over $40,000, with the Flora rule requiring full payment, that option may not have given Sanders much comfort.
Follow up on Statutory Notice and the Administrative Procedure Act Post
One commenter on the post suggested additional links. After the post was written, QuinetiQ filed its reply to the Government’s brief. So, this brief post will provide a quick update of documents available for those interested in this case.
In the post I provided a link to the Tax Court opinion; however, the commenter pointed out that the most pertinent document from the Tax Court case was an order, linked here, setting out the Court’s views on the motion to dismiss based on lack of jurisdiction due to the (allegedly) improper notice of deficiency. The order provides details about the Tax Court’s reasoning in denying the motion that I did not include in the original post.
In the 4th Circuit, QuinetiQ filed the opening brief as the appellant. For some reason we could not access that brief and did not include it as a link in the post. It is linked here. Now that QuinetiQ has filed a reply brief, it is also available and is linked here. The briefs filed by QuinetiQ make clear that it thinks the notice of deficiency in this case really provided no meaningful notice. Not having seen that notice I can only imagine from other notices I have seen that the possibility certainly exists that the notice itself was bad. Then the question is so what? Must the taxpayer move forward on the substance of the matter gleaning what it can from the notice, from what it knew of the audit and from the information that comes out during the Tax Court case or can it get a court to strike the notice of deficiency as inadequate under provision s of the Administrative Procedure Act. Do those provisions apply to an informal agency action such as a notice and, if they do, in applying them to this notice, should it be stricken? Is this just another example of tax exceptionalism that needs to fall or is the notice of deficiency something totally covered by the IRC, outside of the APA, and subject to very relaxed standards for what provides adequate notice.
New Tax Blog
A group of tax professors, some of whom publish great material on tax procedure, have just started a new blog for those who might be interested. Check it out at https://surlysubgroup.com/
About Leslie Book
The real problem here is Note 3 in Guralnik: “Further, the Court does not presently
allow petitions to be filed electronically.” That is just so 20th Century Luddism.
Presumably, FedEx knew about the “inside the Beltway” shutdown of Government offices on Tuesday 17 February 2015, and did not even bother to send their driver out with the delivery.
IMPONDERABLE: What if the FedEx guy/gal was unaware of the shutdown, and did in fact set out in his/her truck and, discovering that the Tax Court was closed for business, returned to the FedEx terminal and placed the package in the bin for the next day’s appointed rounds, and then, the next day, Wednesday 18 February 2016, the documents were delivered to the Tax Court? Clearly, that would be irrelevant to Judge Armen’s Guralnik decision.
MINOR (?) TWEAK TO FACT PATTERN: FedEx guy/gal attempts delivery on Tuesday 17 February, finds Tax Court closed, returns to FedEx station and gives package to dispatcher, who then returns package to Taxpayer. Taxpayer resends returned envelope in another new FedEx envelope with new airbill. See Estate of Cranor v. Commissioner, T.C. Memo. 2001-27.
The Cranor case is conspicuous by its absence from Judge Armen’s opinion in Guralnik.
[My background on the issue: I wrote “Analysis of the Split Authority on Proof of a Postmark under Internal Revenue Code § 7502”, 21 UNIVERSITY OF DAYTON LAW REVIEW 379 (1996). The IRS subsequently resolved the split authority by amending Treas. Reg. § 301.7502-1 to provide that postal or PDS receipts are the exclusive means of proving a postmark where the document is received after its nominal due date and no postmark appears on the mailpiece. [T.D. 9543, 76 FR 52563, 23 August 2011]. T.D. 9543 also similarly set forth the rules for the use of the PDS.
I was one of the witnesses to testify at the IRS/Treasury rulemaking hearing on 11 January 2005. An unofficial transcript of the hearing is available at 2005 TNT 12-21.
‘Presumably, FedEx knew about the “inside the Beltway” shutdown of Government offices on Tuesday 17 February 2015, and did not even bother to send their driver out with the delivery.’
Was that a snow day? I infer that Tax Court doesn’t have a night box for deliveries as Court of Federal Claims has. Could the FedEx driver nail the package to the front door of Tax Court?
‘MINOR (?) TWEAK TO FACT PATTERN: FedEx guy/gal attempts delivery on Tuesday 17 February, finds Tax Court closed, returns to FedEx station and gives package to dispatcher, who then returns package to Taxpayer. Taxpayer resends returned envelope in another new FedEx envelope with new airbill. See Estate of Cranor v. Commissioner, T.C. Memo. 2001-27.’
But FedEx’s equivalent of a postmark on the returned envelope, or PDS receipt or whatever, proves timely shipping by a non-approved method of shipment, so it would be irrelevant no matter how the original shipment is proven.
Again the US’s diaspora gets screwed. I usually use EMS for which the Japanese and US post offices cooperate and are supposed to complete delivery within 3 days, but when US customs decides to delay inspection by 4 days I get screwed.
With registered mail I think the USPS is supposed to add its own postmark to an envelope after arrival in the US, but I don’t know if they do. USPS often refuses to return completed Advice of Receipt cards (return receipts). Sometimes USPS does return a completed AR card showing unexplained delays of days or weeks or months. USPS’s web site sometimes provides traces and sometimes doesn’t, and sometimes deletes traces that were previously available.
If Tax Court starts allowing electronic filing, will it really work? I’ve read that the IRS allows electronic filing if the person’s internet connection makes the IRS’s servers think the person is in the US (regardless of whether the person really is in the US). I read someone’s report that the IRS rejected his electronic filing because his internet connection made the IRS’s servers think he was in Canada (even when he was in the US). The Social Security Administration’s servers used to block all connections from Japan, even just to view public pages of information, but last year they started working.