The U.S. Supreme Court has decided not to hear the appeal from the Ninth Circuit in the case of Baldwin v. United States, Case No. 19-402.[1]  The denial leaves standing the Ninth Circuit’s ruling that Reg. §301.7502-1(e)(2) rendered irrelevant a prior Ninth Circuit decision in the case of Anderson v. United States, 966 F.2d 487 (9th Cir. 1992). 

We previously wrote about this case when it was first decided by the Ninth Circuit in April 2019.[2]

The issue involved whether a taxpayer could only show timely mailing of their document by producing a certified or registered mail receipt stamped by a U.S. Postal Service employee or whether they could resort to other evidence showing the document had been timely mailed.  In 1992 the Ninth Circuit had ruled that other evidence could be considered in the Anderson case.  Other circuits had held that provisions Congress enacted in IRC §7502 for proof of timely filing of documents were meant to be the sole method of proving such timely mailing.

This split in the circuits eventually led the IRS in 2011 to issue revised regulations under §7502, taking the side of the circuits that held that the section was meant to be the sole method of proving timely mailing of the document.  The relevant provision at §301.7502-1(e)(2) now reads:

(i)Registered and certified mail. In the case of a document (but not a payment) sent by registered or certified mail, proof that the document was properly registered or that a postmarked certified mail sender's receipt was properly issued and that the envelope was properly addressed to the agency, officer, or office constitutes prima facie evidence that the document was delivered to the agency, officer, or office. Other than direct proof of actual delivery, proof of proper use of registered or certified mail, and proof of proper use of a duly designated PDS as provided for by paragraph (e)(2)(ii) of this section, are the exclusive means to establish prima facie evidence of delivery of a document to the agency, officer, or office with which the document is required to be filed. No other evidence of a postmark or of mailing will be prima facie evidence of delivery or raise a presumption that the document was delivered. (emphasis added)

The Ninth Circuit found that prior Supreme Court precedent, found in National Cable & Telecommunications Association v. Brand X Internet Services, 545 U.S. 967, 982 (2005), required the Court to accept the IRS’s view of the law so long as the law itself did not clearly speak to the issue of whether other ways of proving timely mailing are allowed and the IRS regulation is a reasonable interpretation of the law.  The Ninth Circuit noted:

We did not hold in Anderson that our interpretation of the statute was the only reasonable interpretation. In fact, our analysis made clear that our decision filled a statutory gap. Under Brand X, the Treasury Department was free to fill that gap by adopting its own reasonable interpretation of the governing statute.[3]

The Supreme Court determination not to hear this case does not necessarily mean the Court agrees that the case was properly decided, but it can reasonably be read to imply the members of the Court who decided not to hear the case either do agree it was properly decided or simply believe the issue isn’t important enough at this time to take up the Court’s time.  As a practical matter, it means that taxpayers should assume that any proof of mailing other than that provided for in the regulation is not likely to hold up if the IRS decides to challenge the issue.  Certainly, in the Ninth Circuit that result now is virtually assured unless a party can persuade the Supreme Court to hear a later case on the matter coming up via that Circuit.

The case has garnered attention outside the tax world due to the possibility the Court might have used this case as a vehicle to reconsider the Brand X decision.  While the majority of the Court is not ready to do that, the author of the very decision in question, Justice Thomas, now is ready to reconsider the matter.  Justice Thomas authored a dissent on the petition for certiorari.  As Justice Thomas wrote:

Although I authored Brand X, “it is never too late to ‘surrende[r] former views to a better considered position.’” South Dakota v. Wayfair, Inc., 585 U. S. ___, ___ (2018) (THOMAS, J., concurring) (slip op., at 1) (quoting McGrath v. Kristensen, 340 U. S. 162, 178 (1950) (Jackson, J., concurring)). Brand X appears to be inconsistent with the Constitution, the Administrative Procedure Act (APA), and traditional tools of statutory interpretation. Because I would revisit Brand X, I respectfully dissent from the denial of certiorari.[4]

As Justice Thomas’ citation of Wayfair suggests, this is not the first time recently the Justice has decided he erred in the past—while not the author, he had been part of the majority in the Quill decision which was overturned by the Wayfair decision, with Justice Thomas also being part of the majority in that more recent case.

[1] United States Supreme Court Orders List, February 24, 2020, https://www.supremecourt.gov/orders/courtorders/022420zor_mjo1.pdf, p. 49

[2] Ed Zollars, “Ninth Circuit Panel Holds Taxpayers Cannot Rely on Common Law Mailbox Rule to Prove Timely Filing of Documents,” Current Federal Tax Developments website, https://www.currentfederaltaxdevelopments.com/blog/2019/4/17/ninth-circuit-panel-holds-taxpayers-cannot-rely-on-common-law-mailbox-rule-to-prove-timely-filing-of-documents, retrieved February 26, 2020

[3] Howard L. Baldwin et ux. v. United States; CA9, No. 17-55115; No. 17-55354; 921 F.3d 836, April 16, 2019

[4] United States Supreme Court Orders List, February 24, 2020, https://www.supremecourt.gov/orders/courtorders/022420zor_mjo1.pdf, p. 50