Taxpayer petitions must still be filed in hard copy. So you still need to understand the §7502 mailbox rules and the case of Sara M. Thomas and David A. Thomas v. Commissioner, T.C. Memo. 2020-33 (Mar. 11, 2020) (Judge Vasquez) teaches us a useful lesson. There, taxpayers mailed their petition on March 5, 2018, the last day of the 90 day period. When received by the Tax Court the envelope had two postmarks, one from a private postage meter that read “March 5” and one from the USPS that read “March 6.” Relying on the applicable regulation, the Court said it was the USPS postmark that counted and dismissed the case for being filed late.
At one level this case is a straightforward lesson about the mailbox rules. But it also illustrates one meaning of the phrase “Rule of Law.” You would not think Tax Court opinions would deal with legal philosophy. But they sometimes so. Details below the fold.
Law: Deficiency Procedure And Timely Filing Rules In 400 Words
When the IRS proposes to assess a deficiency of tax, it must send a Notice of Deficiency (NOD) to the taxpayer’s last known address. §6212. Taxpayers can then petition the Tax Court to redetermine the proposed deficiency. §6213. Taxpayers have 90 days from the date of the NOD (150 days if the notice was mailed to a foreign address) to file their petition. Id. Even though the Tax Court recently expanded and updated its electronic filing program, taxpayers may not electronically file original petitions but must instead still file them the traditional way. See this helpful Practitioner’s Guide issued by the Tax Court, in Appendix II. That means the physical delivery rule applies: a petition is properly filed only when it is physically received in the Tax Court’s Clerk’s Office. T.C. Rule 22(a). Thus, if the Tax Court Clerk’s office receives a petition after the 90 period, that petition is late.
Tax Court Rule 22 gives taxpayers an exception to the physical delivery rule for petitions mailed on or before the deadline but received after the deadline. The Tax Court will treat the petition as received timely under “the circumstances under which timely mailed papers will be treated as having been timely filed, see Code section 7502.” Rule 22(b). Section 7502 is the statutory mailbox rule and it gets imported into the Tax Court procedures via Rule 22.
Section 7502(a) sets out the basic rule: timely mailing equals timely filing. Treas. Reg. 301.7502-1(c) creates three sub-rules. First (c)(1)(i) gives an address requirement. It requires taxpayers to properly address the petition. Second, (c)(1)(ii) gives a deposit requirement. It requires that taxpayers must deposit the petition “with the domestic mail service of the U.S. Postal Service (USPS)” before the end of the SOL. Third, (c)(1)(iii) gives a post-mark requirement. It requires the envelope containing the petition to be properly post-marked and that the date of the post-mark be on or before the last day of the filing period. There are other sub-rules dealing with use of private delivery services, but they are not applicable today.
The sub-rule at issue in today’s case is the third one: the post-mark requirement. I think it is useful to think about this third requirement as dividing post-marks into three kinds: USPS post-marks, Private Delivery Service (PDS) post-marks, and taxpayer-generated post-marks. For those interested, I explain my reasons in Lesson From The Tax Court: Using 7502 To Beat the Statute Of Limitations (November 11, 2017).
Subsection (c)(1)(iii)(B)(3) provides that if the envelope containing the Tax Court petition is stamped with both a taxpayer-generated post-mark and also a USPS post-mark, only the USPS post-mark counts for meeting the post-mark requirement. That's the two postmark rule.
Facts and Lesson
The IRS sent Ms. and Mr. Thomas an NOD dated December 4, 2017, proposing to assess a deficiency for their 2015 tax year. That meant the last day for them to file a timely petition in Tax Court was March 5, 2108, a Monday. The petition was physically delivered to the Tax Court by the USPS on March 12, 2018. So unless the mailbox rule rescued them, the petition was late.
The envelope containing the petition was properly addressed, meeting the first sub-rule. The taxpayers alleged that they put the private postage meter mark on the envelope on March 5, 2018 and they put the envelope into a USPS mailbox on March 5th before the last collection time marked on the mailbox. Judge Vasquez assumed that to be true and so that met the second sub-rule of timely deposit.
The problem for these taxpayers was that the envelope bore two post-marks. First was a private postage meter mark dated March 5, 2018. The second was a USPS mark dated March 6, 2018. Under these facts Judge Vasquez ruled that the mailbox rule did not save the Thomases because of the two postmark rule: “We follow the guidelines the regulations provide us. *** Accordingly, even if we were to credit petitioners’ assertions that they timely deposited the petition in the mail, the petition is still considered not timely filed because the USPS postmark on the envelope does not bear a date on or before March 5, 2018.”
And that, dear readers, is how the two postmark rule works. It's a very straightforward lesson.
Comment: Rule of Law
Legal philosophers debate what the “Rule of Law” actually means. The debate is sometimes muddied when debaters focus on different aspects of the term. For example, one might focus on the source of legal rules. In the early days of the American Republic, most law was common law, explained by the judges deciding the case. Critics at that time argued that the common law was simply a false front put up by judges exercising uncontrolled discretion. "The Common Law is the perfection of human reason,---just as alcohol is the perfection of sugar," the reformer Robert Rantoul dryly observed. The common law was not the Rule of Law; it was simply the rule of judges, drunk on their own power. Only when the rules were put down in writing by legislatures could you have the Rule of Law. Once that happened, judges would be forced to apply the rules as written, kind of like a computer applies the rules written by programmers. That way of thinking sees the Rule of Law as the Law of Rules, a phrase that so delighted Justice Antonin Scalia he used it as the title for this lovely little essay.
Today’s case illustrates the point when we contrast it with an opinion Judge Vasquez issued just a few weeks ago in Seely v. Commissioner. I blogged about that case in "Lesson From the Tax Court: The Common Law Mailbox Rule Lives!” There, as here, the Tax Court received the petition after the due date. There, as here, the taxpayer had properly addressed the envelope, meeting the first sub-rule. There too, as here, the taxpayer met the second sub-rule of timely deposit. But the difference was this: whereas in today’s case the envelope had two postmarks, the envelope in Seely had none. No postmark at all!
Judge Vasquez could have told the Seely taxpayers “too bad, so sad.” The envelope failed the postmark requirement of the third sub-rule because it had no postmark. Put another way, since the written rules did not cover the situation, that meant they could not provide the relief the taxpayers needed.
But instead, Judge Vasquez simply ignored the third sub-rule, writing “we find that it is more likely than not that the petition was mailed on June 22, 2017.” Period. Put another way, Vasquez subbed in part of the common law mailbox rule to find the petition timely.
Those who see the Rule of Law as the Law of Rules might critique Seely as violating the Rule of Law because of how Judge Vasquez went beyond the written rules and used common law. The taxpayers in Seely just got lucky: the USPS failed to put on a post-mark. In contrast, the taxpayers in Thomas were unlucky: the USPS put on a second post-mark. Notice that under the regulations the Thomases would likely have prevailed if the only postmark were the private postage meter mark. That is because the Tax Court got their petition well within the expected delivery time.
These disparate results may not seem consistent with the Rule of Law.
This critique is misplaced because it silently shifts the focus of contrast. Instead of contrasting the source of legal rules, this critique contrasts the effect of legal rules. You know this as the phrase “no person is above the law.” The idea is that no person should be able to get special rules or special treatment just because of the color of their eyes or skin or money. Legal rules should treat everyone the same. Allowing discretion allows discrimination which violates the Rule of Law.
Looking to the effect of legal rules is certainly part of the idea of "Rule of Law." However, the above critique confuses source and effect by implying that only by following written rules can judges avoid invidious discrimination. Any reader who has ever written a “tailored” personnel description knows the fallacy of the critique. Discrimination occurs regardless of the source of rules. Legislatures can be as invidiously discriminating as judges. Gee, just look at the law of slavery in the American South before the Civil War. Look at the Jim Crow laws after the Civil War. Look at whatever Tax Code provision you think unfairly favors some class of taxpayers!
Judges must discriminate. That’s part of their job description. They are not computers dressed in robes. The trick is, however, to be sure they do not improperly discriminate. That is the reason we make judges write opinions.
So the critique fails here because there is no indication that the different outcomes resulted from improper discrimination. What constitutes “improper” is of course contingent on time and place. But I cannot think of any time or place where the actions or errors of a third party (the USPS) was an improper consideration. Seely and Thomas had different outcomes because they had a critical difference in facts: the number of post-marks. Envelopes with two post-marks have to meet the post-mark requirement. Envelopes with no post-marks don’t. Each outcome is consistent with the concept of the Rule of Law...although I bet the Thomases doubt it.
Bryan Camp is the George H. Mahon Professor of Law at Texas Tech School of Law.