The mail box rule – the common law rule that holds that timely mailing is timely filing – can no longer be relied as evidence of timely filing according to the United States Court of Appeals for the Ninth Circuit. In Baldwin v. United States, decided April 16, 2019, the court held that the mailbox rule has been supplanted by regulations promulgated under section 7502.
Facts of the case
The taxpayers, Howard and Karen Baldwin, reported a net operating loss on their 2007 tax return and carried the loss back to 2005 to claim a refund of $167,000. Under section 6511, the taxpayer had three years from the time they filed their 2007 tax return (generating the loss) to carryback the loss and claim a refund for 2005. Under the facts of the case, the Baldwins had until October 15, 2011 to file their claim.
The Baldwins claimed that they mailed the amended 2005 claiming a refund in June of 2011, four months before the statutory deadline. However, the IRS never received their claim for refund. The taxpayer subsequently refiled their claim in July 2013. In filing a claim for refund, the taxpayers did not follow the requirements for certified mail set out in the regulations. Their reliance on the mailbox rule as evidence of filing was misplaced and the claim for refund was not timely filed.
The IRS denied the claim as it was beyond the October 15, 2011 deadline imposed by section 6511. The Baldwins then sued for a refund in U.S. District Court. The Baldwins prevailed receiving their 2005, but were also awarded $25,000 in litigation costs. The government appealed the district court’s judgment.
Arguments
The Baldwins applied the common law mailbox rule, and argued that their refund claim was timely mailed and therefore timely filed. The Baldwins’ initial claim was never received by the IRS and the subsequent claimed was received after the statute of limitations on refunds had expired. The Baldwins had produced witnesses that stated that they had mailed the claim for refund at the U.S. post office in Hartford, Connecticut on June 21, 2011, well within the statutory deadline.
The issue raised by the government on appeal was whether the district court had authority to hear the claim for refund. The government argued that the regulations promulgated under section 7502, which require that a taxpayer use registered and certified mail or an equivalent to prove that a taxpayer mailed the document, bar application of the common law mailbox rule.
Court analysis
The Appeals Court determined that the common law “mailbox rule” had been statutorily supplanted by section 7502 of the Code and accompanying regulations. Relying on Treasury Regulation 301.7502-1(e)(2)(i) the court ruled that the taxpayer’s claim was not timely and ruled for the government on appeal. Because the claim was not timely filed, the district court could not entertain a refund suit.
At trial, the Baldwins produced credible testimony to establish that the claim for refund had been timely mailed, although never received by the IRS. The taxpayers did not provide evidence showing they utilized certified or registered mail when mailing their refund in accordance with section 7502 and related regulation, and instead relied upon the “mailbox rule” – a common law rule that provides that timely mailing is considered timely filing.
The court agreed with the government’s argument that the mailbox rule had been replaced by detailed regulations under 7502. Treasury Regulations at section 301.7502 provide extensive rules on the timely mailing of documents and payments of tax. Regulation 301.7502-1(e)(2) provides that in the event that the document is not actually delivered, a taxpayer can rely on registered or certified mail as evidence of timely filing. According to the court, the specific rules provided in the regulations supplanted the common law mailbox rule. Because the Baldwins did not use certified or registered mail (or their equivalents) the Baldwins had failed to document the mailing of their claim as specified by the regulations.
Key takeaway
Although the result here are somewhat harsh, the opinion clearly dismisses the common law mailbox rule and replaces it with specific regulations on the timely mailing and filing of documents with the IRS. To insure timely filing, taxpayers should use registered or certified mail – or the equivalent through private delivery services. At least in the 9th Circuit Court of Appeals, a taxpayer can no longer rely on the mailbox rule and is required to follow regulations under section 7502.
