Extrinsic evidence not allowed to prove when amended return filed

By James A. Beavers, CPA, CGMA, J.D., LL.M.

The Court of Federal Claims held that taxpayers could not use extrinsic evidence to prove that they timely filed a refund claim on an amended return under the Sec. 7502 deemed-delivery rule where the envelope in which they sent the amended return to the IRS did not have a postmark on it.

Background

Gannon and Taylor McCaffery filed their federal income tax return for the 2013 tax year on April 15, 2014, with a total tax liability of $70,977. In 2017, the couple requested a refund by filing an amended tax return claiming an overpayment of $69,080 for the 2013 tax year. The deadline for claiming a refund of an overpayment for 2013 was April 18, 2017. According to the IRS, it received the McCafferys' amended return on April 24, 2017.

The IRS scanned an image of the envelope that the McCafferys sent but, at some point, destroyed the actual envelope. The court described the image of the envelope the IRS sent as follows:

The image has Plaintiffs' surname and address handwritten on the top left, the IRS's address centered, and four postage stamps in the top right corner. Each stamp bears the same two lines of text: "US POSTAGE $0.49" and "SOLD APR FIRST CLASS."). The bottom-right stamp appears to read "SOLD APR 17, 2017 FIRST CLASS," but the exact dates on the others are illegible. The envelope bears the partly legible date "04/24/201" near the bottom right, and an alphanumerical sequence — "09B 030" — across the stamps along the right edge. Several dots and lines appear near the middle of the top edge of the envelope, but they do not form any distinct characters, shapes, or images, and there is no way to tell how they were made. [citations omitted]

The IRS rejected the McCafferys' refund claim as untimely because the receipt date of the amended return was not on or before the deadline for filing an amended return for 2013 and the Sec. 7502 deemed-delivery rule did not apply because the envelope in which the claim was sent did not have a postmark.

The McCafferys then filed a refund suit in the Court of Federal Claims. The IRS sought to dismiss the suit, claiming the court did not have subject-matter jurisdiction over their claim because the McCafferys did not timely file a refund claim according to the IRS guidelines. The McCafferys contended that they should be able to use evidence other than the postmark on the envelope (extrinsic evidence) to prove that they met the timely filing requirement for the refund claim under the deemed-delivery rule.

Rules for timely filing of a refund claim

Sec. 6511 provides that a claim for a refund generally must be filed by the taxpayer within three years from the time the return was filed and the IRS must deny refund claims not timely filed during this period.

Timely filing of a refund claim can be accomplished by delivering it to the IRS within the filing deadline or by mailing it in accordance with the Sec. 7502 deemed-delivery rule. With respect to documents sent by the U.S. mail, the deemed-delivery rule provides that when a document that is deposited in a properly addressed envelope with sufficient postage is actually delivered to the IRS by U.S. mail after a Code deadline, the date of delivery is deemed to be the date of the U.S. postmark stamped on the envelope in which the document is mailed if the postmark's date is on or before the deadline and the mailing was otherwise proper. The deemed-delivery rule also applies to envelopes with certain non-U.S. Postal Service postmarks and with certain private delivery service postmarks, as well as documents mailed by registered or certified U.S. mail.

Regs. Sec. 301.7502-1(c)(1)(iii) states that "if the postmark does not bear a date on or before the last date, or the last day of the period, prescribed for filing the document or making the payment, the document or payment is considered not to be timely filed or paid, regardless of when the document or payment is deposited in the mail."

Consequently, when relying on the deemed-delivery rule, the taxpayer assumes the risk that the envelope that contains the document being filed may not be properly postmarked or postmarked at all. To eliminate this risk, a taxpayer can mail the document by registered mail, in which case the registration date of the document will be treated as the postmark date, or by certified mail, in which case the date of the postmark on the certified mail receipt the sender receives is the postmark date.

Regs. Sec. 301.7502-1(c)(1)(iii) also provides that if the IRS receives a document with a postmark on the envelope made by the U.S. Postal Service that is not legible, the person who is required to file the document or make the payment has the burden of proving the date that the postmark was made. Thus, in a case where the IRS receives a document without a legible postmark, the taxpayer may use extrinsic evidence to prove the date on which the postmark was made.

The Court of Federal Claims' decision

The Court of Federal Claims dismissed the McCafferys' case, holding that they had not timely filed their amended return for 2013 and therefore the court did not have jurisdiction. The court did not allow the couple to introduce extrinsic evidence to prove when the return had been mailed because the envelope in which it was mailed did not have a postmark.

The court stated that the sole framework for deciding the issue of timely filing under the deemed-delivery rule was the Code and the regulations. The Court of Federal Claims found that the McCafferys and the IRS appeared to agree that the couple's amended return was delivered in an envelope without a legible postmark. Referring to post office guidelines, opinions of other courts, and dictionary definitions of the word "postmark" for guidance, the court concluded, after reviewing a copy of the scanned image of the envelope in which the McCafferys mailed the amended return, that the envelope not only did not have a legible postmark on it, it had no postmark at all.

The Court of Federal Claims then considered whether, in the absence of a postmark, it should allow the McCafferys to show by other evidence that the amended return was mailed prior to the deadline for its filing. The court found that, based on the plain language of Sec. 7502, the deemed-delivery rule only applies if a postmark or equivalent marking was made. In other words, the date of the postmark is what matters, not the date of the mailing. The court further found Regs. Sec. 301.7502-1 similarly provides for the use of extrinsic evidence only to prove the contents of an illegible postmark, not to prove the time of mailing when there was no postmark.

The McCafferys pointed to a line of Tax Court cases, beginning with Sylvan, 65 T.C. 548 (1975), to support their position that extrinsic evidence of the timely mailing of a document must be considered when an envelope contains no postmark at all. The court found, however, that the holdings in that line of cases, in which the Tax Court held that extrinsic evidence can be used to prove the mailing date of envelopes with no postmarks, as well as to envelopes with illegible postmarks, were based on conceptual errors made by the Tax Court inSylvan.

In Sylvan, the taxpayer's envelope, like the one containing the McCafferys' amended return, had no postmark and was delivered after the applicable filing deadline. The Tax Court found that there was nothing in the statute or legislative history that indicated Congress's intent in situations where there was no postmark on a delivery envelope or the postmark is illegible. The Tax Court determined its task was therefore to "ask what Congress would have intended on a point not presented to its mind, if the point had been present." Doing so, it concluded that extrinsic evidence should be allowed not only where a postmark is illegible but also where it is absent.

The Court of Federal Claims found several flaws in the Tax Court's reasoning. It noted that the Tax Court was mistaken that the statute did not indicate what Congress had intended. The court stated that "Section 6511(a) contains a deadline, and section 7502 contains a deemed-delivery exception that is textually inapplicable when a postmark is missing" (slip op. at 9). Thus, in the court's view, there was no gap in the statute to be filled; under the statute, a late-received document in an envelope without a postmark is untimely, regardless of the extrinsic evidence.

Moreover, when Sylvan was decided, Regs. Sec. 301.7502-1(c)(1)(iii), allowing for extrinsic evidence to prove the contents of illegible, but not absent, postmarks, had already been promulgated. By allowing for the use of extrinsic evidence in other circumstances, according to the Court of Federal Claims, the Tax Court had created a new exception that was not authorized by Congress or the IRS.

The Court of Federal Claims found that this was inappropriate because, if Congress had intended to provide the additional exception, it would have done so, and that a court should not "assume that because a legislature provided relief from a general rule in one circumstance, similar relief should be applied in other circumstances" (slip op. at 10). In addition, the court noted that limiting judicial discretion to add to enacted statutes was particularly important with respect to jurisdiction because a court's authority to hear cases against the United States rests on waivers of sovereign immunity, which the Supreme Court has held must be interpreted strictly.

Thus, the Court of Federal Claims held that the Sec. 7502 rule allowing the use of extrinsic evidence to prove the mailing date of a document in an envelope with an illegible postmark for purposes of the deemed-delivery rule could not be expanded to cover envelopes that had no postmark at all. Because the McCafferys' envelope containing their amended return had no postmark date and was actually delivered to the IRS after the filing deadline, their claim for refund was not timely filed. As a result, the court held it did not have jurisdiction to hear the McCafferys' refund suit.

Reflections

As was pointed out by the dissent in Sylvan, where there is no postmark, it is arguably impossible for extrinsic evidence of the postmark date to be used to prove that Sec. 7502 applies. According to the dissent, the most that extrinsic evidence can do in that case is prove what the postmark date on the delivery envelope for a document would have been if there had been a postmark on the envelope. Sec. 7502 applies based on "the date of the United States postmark stamped on the cover." Thus, without an envelope with a postmark, it is immaterial what the postmark date on the envelope would have been had the envelope been postmarked.

McCaffery, No. 1:19-cv-01112 (Fed. Cl. 8/9/21)

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