Tax Court petition is ruled untimely

A married couple’s Tax Court petition was held untimely because the delivery service by which they mailed it was not designated as a qualifying private delivery service for purposes of the Sec. 7502 “timely mailing, timely filing” rule.

Facts: The IRS issued the taxpayers, Dzuy Nguyen and Jessica Thai, a notice of deficiency on Oct. 13, 2022, for their 2017 and 2018 individual income tax returns.  The deficiencies for the two years totaled $2,685,942 of income taxes and $1,980,683 in civil fraud penalties.  The notice of deficiency correctly stated that the last day to file a petition with the Tax Court in response to the notice was Jan. 11, 2023, a Wednesday.

The taxpayers prepared a Tax Court petition seeking redetermination of the deficiencies.  They sent the petition to the court using the FedEx Ground delivery service, depositing the envelope containing the petition with FedEx on Jan. 10, 2023.  The court received the petition two days later on Jan. 12, 2023, and the court’s clerk filed it the same day.  Since Jan. 11, the due date for the petition, did not fall on a Saturday, Sunday, or a legal holiday, the petition was filed 91 days after the notice of deficiency was mailed to taxpayers, making it one day late under Sec.  6213(a).

The IRS filed a motion to dismiss for lack of jurisdiction, asserting the taxpayers’ petition was not timely filed since it was filed after the 90-day statutory period had expired.  The taxpayers objected to the IRS’s motion, claiming that they met the timely mailed, timely filed rule when they deposited their petition using FedEx Ground on Jan. 10.

Issues: The Tax Court may exercise jurisdiction over a case “only to the extent expressly authorized by Congress” (Sec.  7442; Hallmark Research Collective, 159 T.C. 126 (2022)).  Taxpayers therefore have the burden of “affirmatively” proving that the court has jurisdiction (see David Dung Le, M.D., Inc., 114 T.C. 268 (2000), aff ’d, 22 F. App’x 837 (9th Cir.  2001)).  The taxpayers’ case was appealable to the Tenth Circuit, which the Tax Court observed in a footnote “has long agreed” with its holdings that the petition filing deadline is jurisdictional.  In a deficiency case, the court’s jurisdiction is “predicated on a valid notice of deficiency and a timely filed petition” (Secs.  6213 and 7442; see also Armstrong, 15 F.3d 970, 973 n. 2 (10th Cir.  1994), aff ’g T.C. Memo. 1992-328).

For taxpayers in the United States, under Sec.  6213(a), a petition must be filed within 90 days of the mailing of a notice of deficiency by the IRS, unless the filing deadline falls on a Saturday, Sunday, or a legal holiday in the District of Columbia.

The taxpayers contended that even though the court received and filed their petition on Jan. 12, they had sent it on Jan. 10, which made it timely filed under the Sec.  7502 timely mailed, timely filed rule.  This rule is set forth in Sec.  7502(a)(1), which provides that if a document is “delivered by United States mail,” then the postmark stamped on the cover shall be deemed to be the date of delivery.

Sec.  7502(f ) states that a reference to the United States mail in Sec.  7502 includes any “designated delivery service.” Sec.  7502(f )(2) defines a “designated delivery service” as a private delivery service designated by the IRS for purposes of Sec.  7502. Thus, the timely mailed, timely filed rule applies to documents delivered by a designated delivery service.

Notice 2016-30 lists all the qualifying private delivery services that have been designated by the IRS.  While this list includes certain forms of delivery by FedEx, FedEx Ground is not one of them.  Moreover, the notice specifically states that “FedEx … [is] not designated with respect to any type of delivery service not enumerated in this list.” In prior cases, the Tax Court has held that the timely mailed, timely filed rule did not apply to FedEx First Overnight or UPS Ground since they were not specifically listed as a designated private delivery service in Notice 2016-30 (Guralnik, 146 T.C. 230 (2016); Raczkowski, T.C. Memo.  2007-72).

The taxpayers did not dispute that their petition was filed after the 90-day filing deadline or that they did not use an IRS-prescribed delivery service.  They argued, though, that FedEx Ground is “substantially identical” to FedEx 2-Day, a private delivery service designated by the IRS in Notice 2016-30.  Because the delivery services are substantially identical, the timely mailed, timely filed rule should apply in their case, they argued.

The court disagreed, holding that even though these methods of delivery may be substantially similar, the court may not rely on ggeneral equitable principles to expand the statutorily prescribed time for filing a petitionh (Eichelburg, T.C. Memo.  2013-269). Congress has given the IRS the power to designate which delivery services meet the timely mailed, timely filed rule.  The court stated that it would not make a designation that Congress has gexplicitly committed to the [IRSfs] discretion.h Therefore, since FedEx Ground was not specifically listed in Notice 2016-30, it did not qualify as a private delivery service.

Holding: Because FedEx Ground was not deemed a designated private delivery service under Notice 2016-30, the taxpayersf petition was not timely filed, since it was received and filed by the court on Jan. 12, 2023, one day after the filing deadline.  Thus, the court dismissed the petition for lack of jurisdiction.

The court recommended to the taxpayers other ways to pursue their claim.  First, they may pursue an administrative resolution with the IRS for their 2017 and 2018 tax liabilities.  Alternatively, they could pay the additional taxes and file a claim for refund.  If the claim is denied or not acted upon for six months, then a suit for refund could be filed in the appropriate district court or the Court of Federal Claims.

■ Nguyen, T.C. Memo.  2023-151

— John McKinley, CPA, CGMA, J. D., LL.M., is a professor of the practice in accounting and taxation, and Marquise Riley, CPA, is a visiting lecturer in accounting, both in the SC Johnson College of Business at Cornell University in Ithaca, N.Y. To comment on this column, contact Paul Bonner, the JofA‘s tax editor.