This article analyzes the recent United States Tax Court decision in Belagio Fine Jewelry, Inc. v. Commissioner, 164 T.C. No. 7 (2025), which addresses the crucial issue of equitable tolling of the 90-day deadline for filing a petition for redetermination of employment status under Internal Revenue Code (I.R.C.) § 7436. Understanding the court’s reasoning is essential for tax practitioners advising clients facing employment tax controversies.

Background of the Case

Belagio Fine Jewelry, Inc. (Petitioner) failed to file quarterly employment tax returns for the years 2016 and 2017. Following an audit, the Commissioner of Internal Revenue (Respondent) issued a notice of employment tax determination under I.R.C. § 7436, dated August 24, 2021. This notice determined that the Petitioner had an employee during the periods at issue and assessed deficiencies in employment tax, additions to tax for failure to timely file under I.R.C. § 6651(a)(1), failure to timely pay under I.R.C. § 6651(a)(2), and penalties for failure to make deposit of taxes under I.R.C. § 6656. The notice explicitly stated that the last day to file a petition with the Tax Court was November 22, 2021.

On November 18, 2021, four days before the deadline, the Petitioner mailed a petition for redetermination to the Tax Court via FedEx Express Saver. The petition arrived at the Court on November 23, 2021, one day after the 90-day deadline expired. The Petitioner’s attorney represented that his staff mailed the petition via FedEx Express Saver, while he would have used FedEx Priority Overnight.

Prior Litigation and the Current Motion

Initially, the Respondent filed a Motion to Dismiss for Lack of Jurisdiction on March 2, 2022, arguing that the petition was filed after the 90-day deadline prescribed by I.R.C. § 7436(b)(2). However, on June 25, 2024, the Tax Court held that the 90-day deadline was a nonjurisdictional claim-processing rule and denied the Respondent’s motion, citing Belagio Fine Jewelry, Inc. v. Commissioner, 162 T.C. 243, 250–260 (2024). Importantly, the court reserved judgment on whether the deadline is subject to equitable tolling until the issue was properly presented.

Subsequently, on August 9, 2024, the Respondent filed a Motion to Dismiss for Failure to State a Claim Upon Which Relief Can be Granted. In this motion, the Respondent argued that the 90-day deadline is not subject to equitable tolling, and in the alternative, that equitable tolling was not warranted under the specific circumstances of the case. The Petitioner objected, contending that this motion was an improper attempt to relitigate the prior ruling.

Petitioner’s Request for Relief: Equitable Tolling

The Petitioner argued that the late filing was due to the attorney’s legal staff selecting the wrong postal service – FedEx Express Saver instead of FedEx Priority Overnight, which the attorney would have chosen. Had FedEx Priority Overnight been used, the petition would have been timely under the timely mailed, timely filed rule of I.R.C. § 7502. Essentially, the Petitioner sought equitable tolling of the 90-day deadline based on this alleged error.

Court’s Analysis of the Law: Equitable Tolling of the 90-Day Deadline

The central legal question before the court was whether the nonjurisdictional 90-day deadline in I.R.C. § 7436(b)(2) is subject to equitable tolling. The court began its analysis by noting the Supreme Court’s recognition that equitable tolling is a traditional feature of American jurisprudence and a background principle against which Congress drafts limitations periods, citing Boechler, P.C. v. Commissioner, 142 S. Ct. 1493, 1500 (2022). Consequently, nonjurisdictional deadlines are presumptively subject to equitable tolling, a presumption that can be rebutted if it is inconsistent with the text or statutory scheme, citing Irwin v. Dep’t of Veterans Affs., 498 U.S. 89, 95–96 (1990); Arellano v. McDonough, 143 S. Ct. 543, 548 (2023); United States v. Beggerly, 524 U.S. 38, 48 (1998).

The court distinguished the deadline in I.R.C. § 7436(b)(2) from the deadline to file a refund lawsuit under I.R.C. § 6511, which the Supreme Court in United States v. Brockamp, 519 U.S. 347, 354 (1997), held was not subject to equitable tolling. The Brockamp Court reasoned that § 6511’s time limit was in an "unusually emphatic form" and "highly detailed technical manner" with multiple reiterations and six specific exceptions.

In contrast, the Tax Court found that I.R.C. § 7436 does not expressly prohibit equitable tolling, citing Boechler, P.C., 142 S. Ct. at 1500. Furthermore, the wording of § 7436(b)(2) – "no proceeding may be initiated" – was not considered "unusually emphatic" compared to other statutes where equitable tolling was permitted, citing United States v. Wong, 575 U.S. 402, 420 (2015) (Federal Tort Claims Act deadline); Volpicelli v. United States, 777 F.3d 1042, 1046 (9th Cir. 2015) (I.R.C. § 6532(c) deadline).

The court also noted that the 90-day deadline is a purely procedural limitation not tied to substantive rights, unlike the deadline in Brockamp which affected the amount of the potential refund. Additionally, while the Respondent pointed to restrictions on assessment and collection in I.R.C. § 7436(d)(1) tied to the deadline, the court found these related to procedural steps for collection rather than substantive rights.

The Tax Court further highlighted that the text of I.R.C. § 7436(b)(2) is not "highly detailed or technical" and contains only one explicit exception regarding determinations not memorialized in a notice, citing SECC Corp. v. Commissioner, 142 T.C. 225, 231–36 (2014). This is significantly different from the six exceptions in § 6511 considered in Brockamp. The court likened the single exception in § 7436(b)(2) to the singular exception in I.R.C. § 6330 (collection due process cases) discussed in Boechler, P.C., 142 S. Ct. at 1501, where the Supreme Court found equitable tolling applicable.

Finally, the court considered the administrative burden, noting that very few petitions are filed annually under I.R.C. § 7436 compared to the vast number of refund claims processed by the IRS or even the number of collection due process cases filed with the Tax Court. Therefore, permitting equitable tolling in these limited § 7436 cases would not create a significant administrative burden, citing Brockamp, 519 U.S. at 352 and U.S. Tax Court, Congressional Budget Justification, Fiscal Year 2025, at 18 (2024).

Based on these considerations, the Tax Court concluded that the presumption in favor of equitable tolling was not rebutted, and therefore, the 90-day deadline in I.R.C. § 7436(b)(2) is subject to equitable tolling.

Application of the Law to the Facts: Why Equitable Tolling Was Not Warranted

Having established that the 90-day deadline is subject to equitable tolling, the court next addressed whether equitable tolling applied to the specific facts of Belagio Fine Jewelry, Inc.’s case. To be entitled to equitable tolling, a taxpayer must demonstrate (1) that it pursued its rights diligently and (2) that extraordinary circumstances outside of its control prevented it from filing on time, citing Menominee Indian Tribe of Wis. v. United States, 577 U.S. 250, 255 (2016).

The court found that the Petitioner failed to satisfy the first prong, as there was no indication that the Petitioner diligently followed up with its attorney to ensure the timely filing of the petition, contrasting this with Holland v. Florida, 560 U.S. 631, 653–54 (2010), where the litigant had repeatedly inquired about the filing. The court stated that the failure to satisfy even one prong is sufficient to deny equitable tolling, citing Menominee Indian Tribe of Wis., 577 U.S. at 256.

Regarding the second prong, the court held that the alleged negligence of the attorney’s legal staff in selecting a non-designated private delivery service (FedEx Express Saver) did not constitute extraordinary circumstances outside the Petitioner’s control. The court emphasized the well-established principle that a client generally bears the risk of their attorney’s negligence, and "garden variety" negligence does not warrant equitable tolling, citing Irwin, 498 U.S. at 96; Maples v. Thomas, 565 U.S. 266, 280–81 (2012); Coleman v. Thompson, 501 U.S. 722, 754 (1991).

The court cited several cases holding that failure to properly mail a petition constitutes garden variety negligence, including Robinson v. DHS, 71 F.4th 51, 59 (D.C. Cir. 2023) (mailing by standard mail); Talamantes-Penalver v. INS, 51 F.3d 133, 136 (8th Cir. 1995) (mailing by regular mail when overnight services were available); and Chitlik v. HHS, No. 22-1790v, 2024 WL 5346731, at *5 (Fed. Cl. Dec. 19, 2024) (failure to choose a guaranteed delivery service).

The court acknowledged the attorney’s candor regarding the staff’s mistake but reiterated that such an error amounts to garden variety neglect and does not rise to the level of warranting equitable tolling.

Court’s Conclusion

Ultimately, the Tax Court held that while the 90-day deadline in I.R.C. § 7436(b)(2) is subject to equitable tolling, the circumstances presented by Belagio Fine Jewelry, Inc. did not warrant its application. Consequently, the court granted the Respondent’s Motion to Dismiss for Failure to State a Claim Upon Which Relief Can be Granted.

Implications for Tax Practitioners

This case provides important insights for tax practitioners. While the Tax Court has confirmed that the 90-day deadline for petitioning the court in employment tax redetermination cases is not a jurisdictional bar and is subject to equitable tolling, the threshold for obtaining such relief remains high.

Strict Adherence to Deadlines: Practitioners must continue to emphasize the critical importance of adhering to the statutory 90-day deadline for filing petitions under I.R.C. § 7436.
Proper Mailing Procedures: When mailing petitions, it is imperative to utilize the United States Postal Service or a private delivery service specifically designated by the Secretary as outlined in relevant IRS notices (such as I.R.S. Notice 2016-30) to ensure timely filing under I.R.C. § 7502. Relying on non-designated services, even if they offer expedited delivery, carries significant risk.
Client Communication and Diligence: Practitioners should advise clients to actively engage in the process and follow up to confirm that the petition has been timely filed. While attorney negligence is generally borne by the client, demonstrating the client’s own diligence may be a factor in rare equitable tolling cases involving more egregious attorney misconduct than simple negligence.
Understanding Equitable Tolling: While equitable tolling is a potential avenue for relief in extraordinary circumstances, it is applied sparingly. Practitioners should have a clear understanding of the stringent two-pronged test and the types of circumstances that the courts deem to be beyond "garden variety" negligence.

The Belagio Fine Jewelry, Inc. case serves as a reminder that while the Tax Court recognizes the potential for equitable relief in appropriate situations, taxpayers bear the responsibility for ensuring the timely filing of their petitions, and errors in selecting mailing services typically will not excuse a late filing. Tax advisors must guide their clients diligently to avoid such pitfalls and ensure compliance with the Tax Court’s procedural rules.

Prepared with assistance from NotebookLM.