Lesson From The Tax Court: No Equitable Tolling For Brain Farts

Tax practice is like comedy: timing is critical.  In tax, however, messing up timing is no laughing matter.  As the sainted Justice Holmes once wrote (in a tax case, nach): “Men must turn square corners when they deal with the Government.” Rock Island R.R. v. United States, 254 U.S. 141, 143 (1920).  That is especially true with deadlines.  Of all the corners in all the laws governing citizen interaction with government, the timing requirements in the Internal Revenue Code contain some of the squarest and sharpest, including the timing requirements for petitioning the Tax Court.

Some folks might think the Supreme Court’s decision in Boechler v. Commissioner, 596 U.S. ___, 142 S.Ct. 1493 (2022), would sand down some of those sharp timing corners.  In Boechler the Supreme Court held that the 30-day period in §6330(d)(1) for taxpayers to petition the Tax Court to review a Collection Due Process decision was subject to equitable tolling.  I think otherwise.  I have not yet seen anyone yet convince the Tax Court to apply equitable tolling to excuse a late CDP petition.  Few have even tried. See Reed v. Commissioner, T.C. Memo. 2025-4; Shaw v. Commissioner, T.C. Memo. 2024-48;  Stephens v. Commissioner, T.C. Memo. 2024-40.  I’m happy to be corrected on that.

Today we learn another lesson on what does not trigger equitable tolling: your attorney’s ordinary negligence. In Belagio Fine Jewelry Inc. v. Commissioner, 164 T.C. No. 7 (Apr. 15, 2025) (Judge Greaves), the taxpayer’s attorney’s staff sent the taxpayer’s petition using a FedEx service that guaranteed the petition would be delivered ... one day late!  Brain fart! (trigger warning—link is to a pretty funny collection of them).  Desperately seeking relief, the taxpayer argued for application of the timely-mailed-timely-filed rule, codified in §7502 and, failing that, asked for equitable tolling.  Judge Greaves finds that the FedEx mailing did not turn the very square corners of the statutory timely mailing rule and that brain farts are no basis to apply equitable tolling. 

Details below the fold.

Law:  Finding the Applicable Filing Deadline
When Congress created what is now the Tax Court back in 1924, it permitted taxpayers to petition the Court only to review a proposed deficiency of tax.  Over time, however, Congress has granted Tax Court power to hear other disputes taxpayers may have with the IRS.  I think of each of these grants as creating a new room of power, each designed to cover a specific type of problem.  Congress has not given the Tax Court generalized power over any taxpayer disputes but only very specific grants, each of which must be evaluated on its own terms.  What the Tax Court has power to do in one room may not be what it can do in another.  For an example, see Lesson From The Tax Court: The Many Rooms Of Tax Court Power, TaxProf Blog (Oct. 4, 2021).  Or go look at IRM 35.1.1, which gives the surprisingly long, long list of different jurisdictional grants.

Each grant of power to the Tax Court comes with its own deadline to file petitions.  For example, to enter the Tax Court room of power to review an IRS collection decision, taxpayer have a very short 30-day deadline.  §6330(d)(1).  See Lesson From The Tax Court: The CDP Butterfly, TaxProf Blog (July 6, 2021).  In contrast, taxpayers have 90 or even 150 days to file a petition contesting a Notice of Deficiency.  See Lesson From The Tax Court:  The 150 Day Rule For Filing Tax Court Petitions, TaxProf Blog (Jan/6, 2025).

In Boechler, the Supreme Court addressed only one of the many statutory deadlines, the one for accessing Tax Court jurisdiction to review CDP decisions.  Sure, the Court there held that the §6330(d)(1) deadline was not jurisdictional.  Sure, it also held that the deadline was subject to equitable tolling.  But that decision does not apply to any other of the myriad statutory deadlines.  Instead, each deadline must be separately evaluated to see whether it permits equitable tolling.  We can look forward to lots of lessons about these statutes!  The Tax Court has already held that it will continue to read the §6213 deadline as jurisdictional. Sanders v. Commissioner, 161 T.C. 112 (2023) (rejecting the Third Circuit’s contrary holding in Culp v. Commissioner, 75 F.4th 196 (2023)).

Today’s case involves the statutory deadline in §7436 which permits taxpayers to petition the Tax Court to review a decision by the IRS that the taxpayer has failed to properly pay employment taxes on workers who should be classified as employees.  As nicely explained in Publication 5146, the IRS may open an examination on a taxpayer who employs workers but fails to properly classify them as employees and therefore fails to remit the proper amount of employment taxes.

Section 7436(b) provides that when the IRS finishes its examination it must mail the taxpayer a notice of its determination and, importantly, “no proceeding may be initiated under this section with respect to such determination unless the pleading is filed before the 91st day after the date of such mailing.”

In an earlier decision, Judge Greaves found that §7436(b) was not a jurisdictional timing requirement. Belagio Fine Jewelry v. Commissioner, 162 T.C. 243 (2024) (“Belagio I”).  But, says he, that does not mean equitable tolling automatically applies.  So he spends a good deal of space in today’s opinion explaining why the 90-day deadline in §7436(b) is subject to equitable tolling.  That’s an interesting analysis but it’s not our lesson.  It’s just an example of how the Tax Court will now be asked to consider every single different timing deadline for petitions to decide whether (1) they are jurisdictional and (2) they are subject to equitable tolling!  Yowsa.

Rather today’s lesson is about how the Tax Court will apply equitable tolling when a taxpayer (or their representative) messes up the timely-mailing-timely-filing rule.  So let’s first review that rule.  I think it important because there may be an argument that the government missed on why equitable tolling should not apply to this timing requirement.

Law: The §7502 Timely Mailing Rule
Tax Court Rule 22 provides that the Tax Court will pretend a petition is timely if the reason for the late delivery falls under “the circumstances under which timely mailed papers will be treated as having been timely filed, see Code section 7502.” 

Section 7502 provides, in turn that “any...document required to be filed...within a prescribed period...is, after such period ... delivered by the United States mail to the agency, officer, or office with which such return, claim, statement, or other document is required to be filed ... the date of the United States postmark stamped on the cover in which such return, claim, statement, or other document, or payment, is mailed shall be deemed to be the date of delivery or the date of payment, as the case may be.”

Section 7502 is often called the “statutory mailbox rule.”  It’s a “statutory” rule because what “properly mailed” means is defined by...statute!  True, there is some controversy over the extent to which the statutory mailbox rule displaces the common law mailbox rule—see discussion in McBrady v. United States, 167 F.Supp. 3d 1012 (D.Minn. 2016)—but the taxpayer’s here did not argue for that, so we save that discussion for a future lesson.

The regulation implementing the statute, Treas. Reg. 301.7502-1, expands the bare statutory language quite a bit.  It provides, actually, quite a bit of wiggle room to help taxpayers.  The regulation is pretty gnarly, but the gist of it is that that taxpayers must meet three requirements to get the benefit of the statute.  First, subsection (c)(1)(i) gives an address requirement.  It requires taxpayers to properly address the petition.  Second, subsection (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, subsection (c)(1)(iii) gives a post-mark requirement.  It requires the envelope containing the petition to be properly post-marked.

We’ve seen lessons in the past on that third requirement.  See e.g. Lesson From The Tax Court: A Timely Lesson For Filing Returns, TaxProf Blog (May 17, 2021).

Today’s lesson is about the second requirement.  Even though the second requirement seems to say a taxpayer must us the USPS, §7502(f) permits use of delivery services other than the USPS. Accordingly, subsection (c)(3) of the Treas. Reg. provides that “a service of a private delivery service (PDS) may be treated as an equivalent to United States mail for purposes of the postmark rule if the Commissioner determines that the service satisfies the conditions of section 7502(f)(2).”  Again, note the wiggle room here for taxpayers to use non USPS delivery services. 

The regulations goes on to tell readers that the IRS will publish a list of acceptable services of PDS’s in the Internal Revenue Bulletin.  The last such publication was IRS Notice 2016-30 (“Designation of Private Delivery Services”), 2016-18 I.R.B. 676.  As relevant to today’s lesson it lists the following eight acceptable services from FedEx:

1. FedEx First Overnight
2. FedEx Priority Overnight
3. FedEx Standard Overnight
4. FedEx 2 Day
5. FedEx International Next Flight Out
6. FedEx International Priority
7. FedEx International First
8. FedEx International Economy

If a taxpayer uses any one of these services from FedEx, then they will have met the deposit requirement in the regulation.  That’s a lot of wiggle room for taxpayers to obtain the benefit of the timely-mailing rule.

Facts
The dispute between the taxpayer here and the IRS here was whether Belagio was supposed to have filed employment tax returns and paid employment taxes for the periods at issue (all quarters of 2016 and 2017).

On August 24, 2021, the IRS issued a §7436 notice of employment tax determination.  That meant the 90th day to file a petition was Monday, November 22, 2021.

On Thursday, November 18, 2021, the taxpayer’s attorney told his staff to send the taxpayer’s petition to the Tax Court using FedEx.  For some inexplicable reason, the attorney’s staff chose to use the FedEx Express Saver service, which guarantees delivery by the third business day.  FedEx business days are Monday through Friday (except for some home delivery services which have Saturday delivery).  So if you mail on a Thursday, the first business day is Friday, the second one is Monday and the third one is...the following Tuesday.

So guess when FedEx delivered the taxpayer’s petition to the Tax Court?  One day late, on Tuesday November 23, 2021!  Was this just a penny-wise and pound foolish decision: a hope that FedEx would deliver earlier than the guarantee?  To me, it looks much more like a brain fart: a failure to count the days.  The attorney told the Tax Court that this was a staff error, not his.  He would have definitely chosen the FedEx Priority Overnight service!  True as that likely is, there is this old-fashioned idea that an employer is responsible for the actions of their employees.  It’s called respondeat superior.

In Belagio I the IRS had filed a motion to dismiss for lack of jurisdiction, arguing that the petition had been filed late and §7436 was a jurisdictional timing requirement.  Judge Greaves disagreed and denied the motion.

In Belagio II (today’s case), an undaunted IRS filed a motion to dismiss the petition for a failure to state a claim, again because the petition had been filed late. 

The taxpayer argued, first, that the petition had not been filed late and, second, even if it had, the deadline should have been equitably tolled.

Judge Greaves’ rejection of each argument gives us our two lessons.

Lesson 1: The Sharp Corners of §7502
Our first lesson is that just because a timing requirement is not part of the jurisdictional grant to the Tax Court does not mean taxpayers can be loosey-goosey about it.  Judge Greaves explains that to get the benefit of the §7502 timely mailing rule, taxpayers must use one of the approved mailing services listed in Notice 2016-30.  As seen above, the Notice lists eight different FedEx Services but FedEx Express Saver is not one of them (likely because it did not exist in 2016??).  Judge Greaves notes that “If the petition had been sent via FedEx Priority Overnight, it would have been timely under the timely mailed, timely filed rule of section 7502.”

Actually, if the petition had been sent by Priority Overnight, it would have been received on Friday, before the Monday deadline, and so §7502 simply would not apply.

The lesson here is that neither taxpayers nor attorneys can get the benefit of §7502 by just using any service offered by a Private Delivery Company like FedEx or UPS or DHL.  They must instead ensure they are selecting one of the services listed in Notice 2016-30 (or any later superseding Notice, Rev. Pro., or regulation). 

Lesson 2: Brain Farts Don’t Justify Equitable Tolling
Judge Greaves gives this very nice overview of the Equitable Tolling doctrine, cautioning that the doctrine “is applied sparingly.” Op. at 9.

“To be entitled to equitable tolling, a taxpayer must establish (1) that it pursued its rights diligently and (2) that extraordinary circumstances outside of its control prevented it from filing on time. The first prong of the test requires that a litigant take all reasonable steps to ensure the timeliness of its petition, including engaging with its attorney to ensure a petition is timely filed. The second prong of the test is met only where the circumstances that caused a litigant’s delay are both extraordinary and beyond its control.” Op. at 9.

The taxpayer’s attorney argued that mailing the petition on the Thursday before the Monday deadline showed that the taxpayer had pursued their rights diligently and his staff’s error was out of their control (and his).

Judge Greaves writes that while he “appreciate[s] petitioner’s attorney’s candor and effort to resolve an honest mistake from his staff, this effort does not open the door to equitable tolling.”  Op. at 11.  That is because: (1) “generally a client bears the risk of his attorney’s negligence, and simple negligence on an attorney’s behalf will not warrant equitable tolling”  Op. at 10; (2) “failure to properly mail a petition is garden variety negligence” Id.; and thus (3) “error in selecting a nondesignated private delivery service...is garden variety neglect that does not rise to a level of warranting equitable tolling.”

Query whether, had the attorney being paying attention, he might have caught the error on Thursday which would give time to use FedEx Priority Overnight on Friday for a Monday delivery.  After all, if the petition is physically received by the due date, one does not need the timely-mailing rescue rule.

Comment: An Argument The Government Missed?
Judge Greaves cites to an interesting case for the proposition that the presumption favoring equitable tolling “can be rebutted if equitable tolling is not consistent with the text of the statute or the statutory scheme.” Op. at 5.  The case is United States v. Beggerly, 524 U.S. 38 (1998).

Beggerly involved the federal Quiet Title Act (QTA), which permits plaintiffs to file suit against the federal government’s seizure of land within 12 years after they (or their predecessors in interest) “knew or should have known” of the government’s claim. 28 U.S.C. § 2409a(g). The Supreme Court refused to allow equitable tolling to apply to that statute because the “knew or should have known” language already incorporated an equitable concept. “It is of special importance that landowners know with certainty what their rights are, and the period during which those rights may be subject to challenge. Equitable tolling of the already generous statute of limitations incorporated in the QTA would throw a cloud of uncertainty over these rights, and we hold that it is incompatible with the Act.”

This case made me wonder whether the government missed an argument that the very existence of §7502 precludes equitable tolling of statutory deadlines in the Tax Code.  That is, the government has rights to collect delinquent taxes but is prohibited from taking a collection action until after the petition deadline has expired.  Similar to the “knew or should have known” text, the existence of §7502 adds some statutory wiggle room to determining whether the petition deadline has been met.  It incorporates the common law doctrine of timely-mailing-is-timely filing.  Adding non-statutory wiggle room of equitable tolling would seem incompatible with the equity Congress allows via §7502.

I’m not sure this is a strong argument.  It would seem to prove too much, being equally applicable to the §6330(d)(1) deadline that the S.Ct. has already held is subject to equitable tolling.  Still....

Comment 2:  The Argument the Government Made.
The government seems to have made a similar point by arguing that the prohibition on collection before expiration of the 90-day period indicated that the petition deadline should not be subject to equitable tolling because you would then have a situation where the government would not know whether or not it was prohibited from collecting.  Judge Greaves this response:  “We find nothing inconsistent with permitting equitable tolling in relation to the filing deadline to hear a taxpayer’s case and allowing the IRS to proceed with assessment and collection after the 90-day deadline has expired.” Op. at 7.

Hmmm, so if the taxpayer misses the 90-day deadline, the IRS can collect, even if the taxpayer can later convince a court that it should toll the 90-day deadline?  I confess I have a difficult time following that.  It seems Judge Greaves is saying that the 90-day deadline is non-expandable for one purpose (assessment and collection) even though it’s expandable for another purpose (getting the Tax Court to hear the petition).  I confess puzzlement on why that should be.

Perhaps my puzzlement will be resolved by a later Lesson From The Tax Court.

Bryan Camp is the George H. Mahon Professor of Law at Texas Tech University School of Law.  He invites readers to return on the first Monday of each month (or Tuesday if Monday is a federal holiday) to TaxProf Blog for another Lesson From The Tax Court.

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