The First Circuit Court of Appeals dismissed a suit for refund of Federal Insurance Contributions Act (FICA) taxes Maine Medical Center mistakenly paid for its medical residents in the 2001 tax year, upholding a lower court determination that Maine Medical’s discovery requests were not warranted and that the information it sought from the IRS would not have proved that Maine Medical’s refund claim, which the IRS claimed it never received, was timely ( Maine Medical Center, No. 11-1426 (1st Cir. 3/30/12), aff’g 766 F. Supp. 2d 253 (D. Me. 2011)).
Maine Medical said it mailed its refund claim on April 15, 2005, and
presented testimony about preparing the claim, but did not present
evidence to prove that the claim was actually mailed on that date.
Timely filing of a refund claim is a prerequisite to a tax refund
suit.
In pursuing its refund claim, Maine Medical
issued discovery requests to the IRS, asking a number of questions,
including information about whether and how the IRS searched for its
refund claim and the routine steps the IRS took to process FICA refund
claims from similar institutions. The court held that the answers to
these discovery requests would not establish that the claim had been
timely filed.
In rejecting the request for discovery, the court noted that Maine Medical had not been diligent in preserving its rights because it had not attempted to obtain a duplicate receipt for certified mail (which could have been obtained from the post office within two years of mailing) or investigated why the IRS had not responded to its refund claim until just before it filed suit.
The common law mailbox rule would not prove Maine Medical’s request was timely because the rule does not apply unless a document has been mailed in sufficient time to be received by the due date in the ordinary course of post office business. Since Maine Medical asserted an April 15 mailing date, the refund claim could not have arrived in the IRS’s hands on April 15.
The statutory mailbox rule (Sec. 7502), under which timely mailing
is treated as timely filing, did not apply because there was no
evidence to prove timely mailing and no evidence of delivery (which is
required under the rule). And the court noted that the “extrinsic
evidence” doctrine that other circuits have adopted allowing other
evidence besides a postmark to be offered to prove mailing would not
help Maine Medical because its employees could not remember anything
about filing the return, and it had not attempted to get a duplicate
certified mail receipt.
The court recognized that the
IRS could use the circumstances presented in this case to dispose of
refund suits merely by claiming it had no record of receiving a tax
document. Despite that possibility, taxpayers seeking jurisdictional
discovery must prove due diligence. Where a taxpayer has not been
diligent in preserving its claim and has presented no evidence of
mailing or a postmark, the court found no error in denying this type
of discovery.
—Sally P. Schreiber ( sschreiber@aicpa.org ) is a JofA senior editor.
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