Pond muddies the waters of the mailbox rule

Editor: Mo Bell-Jacobs, J.D.

Sec. 7502 sets the standard for timely filing with the IRS of a tax return, refund claim, or other document, as well as timely payment of tax. Pursuant to Sec. 7502(a), a return, claim, or payment is deemed to be filed or paid on the date of the postmark stamped on the envelope in which it was mailed to the required IRS address with sufficient postage, even if it is received after the filing or payment due date. Except as provided in Sec. 7502(f) (discussing private delivery services), Sec. 7502 does not apply unless the form or payment is actually physically delivered to the IRS by the U.S. Postal Service (Regs. Sec. 301.7502-1(e)).

Prior to the 1954 enactment of Sec. 7502, the common law principle known as the “mailbox rule” provided a rebuttable presumption that a return was physically delivered to the IRS where a taxpayer could show that the form was mailed on or before the due date in an envelope with the proper postage and address. However, where there is a dispute as to the actual delivery of a document, there has been a significant split of authority regarding whether Sec. 7502 supersedes the common law mailbox rule or serves as supplemental authority. In May 2023, the Fourth Circuit weighed in on the issue in Pond, 69 F.4th 155 (4th Cir. 2023), and added further complexity to the enduring debate over a taxpayer’s burden to prove physical delivery of a form to the IRS under either the common law or statutory rule.

The long-standing circuit split

Operating as a statutory mailbox rule, Sec. 7502 equates the date of a return’s filing with the date of the U.S. Postal Service postmark where a return is mailed on or before the due date and is physically delivered to the IRS after the due date. To receive such treatment, Sec. 7502(a) requires that the return be deposited with the U.S. Postal Service on or before the due date, properly addressed, with prepaid postage, and physically delivered to the IRS. Sec. 7502(c) also permits the proper use of registered or certified mail or a designated private delivery service to establish actual delivery to the IRS. While Sec. 7502 provides these narrow, objective criteria, the mailbox rule under common law permitted the consideration of extrinsic or circumstantial evidence, such as other documents or testimony from the individuals involved, to support a presumption that a document was physically delivered to the recipient within a reasonable delivery time frame (e.g., Detroit Automotive Products Corp., 203 F. 2d 785 (6th Cir. 1953); Philadelphia Marine Trade Association, 523 F.3d 140 (3th Cir. 2008)).

The courts of appeal have for decades rendered inconsistent opinions on how Sec. 7502 affects the common law mailbox rule. Some courts have held that the strict physical delivery requirements of Sec. 7502 supersede the common law rule and thereby provide the only means of demonstrating that a document was physically delivered to the IRS (e.g., Miller, 784 F.2d 728 (6th Cir. 1986); Deutsch, 599 F.2d 44 (2d Cir. 1979)). On the other hand, other courts take the position that because Sec. 7502’s language did not expressly supplant the common law mailbox rule, it instead provides a safe harbor or supplemental authority to the long-standing rule (e.g., Sorrento, 383 F.3d 1187 (10th Cir. 2004); Anderson, 966 F.2d 487 (9th Cir. 1992)).

The contradictory rulings across circuits prompted Treasury to amend its regulations in August 2011. Appearing to reinforce the position that Sec. 7502 supplants the common law mailbox rule, Regs. Sec. 301.7502-1(e)(2) expressly states that the provisions of Sec. 7502 provide “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.” The regulation further clarifies that “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.”

In 2019, a Ninth Circuit decision signaled that many jurisdictions were continuing to align with the government’s position (see Baldwin, 921 F. 3d 836 (9th Cir. 2019)). In Baldwin, the court emphasized that Regs. Sec. 301. 7502-1(e)(2) “makes clear that, unless a taxpayer has direct proof that a document was actually delivered to the IRS, Sec. 7502 provides the exclusive means to prove delivery” (Baldwin, 921 F. 3d at 841).

Pond court appears to reach middle ground

In May 2023, the Fourth Circuit considered the physical delivery requirements under common law and Sec. 7502 in Pond. In remanding part of the case back to the district court, the Pond opinion suggested there may be alternative means to allege physical delivery outside the criteria outlined in Sec. 7502.

Taxpayer Stephen Pond sued for a refund of his 2013 income taxes. In 2017, the IRS audited a 2012 tax return for a business in which Pond was invested and adjusted the return. This adjustment resulted in an increase to Pond’s taxable income for that year, which he promptly paid, with interest, at the close of the examination. Pond’s accountant, however, later discovered that the IRS had made an error in its adjustments and Pond had in fact overpaid his 2012 income tax. Due to the 2012 overpayment, his 2013 tax was overpaid as well.

Upon these discoveries, Pond requested a refund of the overpayment of his 2012 and 2013 taxes, including an overpayment of interest for 2012. Pond mailed separate refund claims for each tax year in a single envelope to the appropriate IRS Service Center by first-class mail. He also sent a form requesting a refund of the 2012 interest overpayment to a separate IRS Service Center. After a series of follow-ups with the IRS by phone and fax, Pond eventually received a refund for his 2012 taxes, including interest. The IRS, however, eventually denied Pond’s claim for refund for the 2013 tax year on the grounds that the claim was not received before the statute of limitation for refund had expired.

Pond filed suit in district court, where he argued that there was a presumption of timely delivery of the 2013 claim because it was included in the same envelope as the successfully processed 2012 refund claim. Pond also had faxed a copy of the 2013 claim to a revenue agent during a follow-up call to the IRS. The government asserted that the 2013 refund claim was not received within the statute of limitation for refund claims. The district court dismissed Pond’s case on the grounds that he could not establish physical delivery of the claim before the statute of limitation had run — namely, his method of mailing both claims did not qualify for a presumption of delivery under Secs. 7502(a) and (c) , and the common law mailbox rule was no longer available to trigger such a presumption (Pond, No. 1:21CV83 (M. D.N.C. 4/13/22)).

The Fourth Circuit affirmed the district court’s decision in part and remanded it in part. The appellate court aligned itself with the Second and Sixth circuits’ position that Sec. 7502 “abrogates the common-law mailbox rule because the [statute] ‘speaks directly’ to the same question as the common-law rule,” citing Texas, 507 U.S. 529, 534 (1993). As a result, Pond could not rely upon the common law presumption of delivery. Nor could he rely on Sec. 7502’s presumption of delivery because he had not used U.S. registered or certified mail or a designated private delivery service.

But that did not mean Pond was “out of luck,” the Fourth Circuit explained. He still could try to prove, without the benefit of a presumption, that his 2013 refund claim was physically delivered to the IRS. The Fourth Circuit’s decision reviving Pond’s case relies on the premise that, like the common law mailbox rule, the statutory mailbox rule involves the interplay of two distinct presumptions: one of timely delivery and another of physical delivery. There is, first, a presumption of timeliness of a delivery where a document is properly mailed and addressed to its recipient and the delivery is actually made. Under this presumption, the postmark date is deemed to be the date of delivery. Second, there is a presumption of actual delivery of the document where the taxpayer properly uses U.S. registered or certified mail or a designated private delivery service.

Here, the presumption of physical delivery was not available to Pond because he had mailed both claims by firstclass mail and not a method enumerated in Sec. 7502(c). However, Pond could still try to prove, without the benefit of a presumption, that the 2013 claim was received, the Fourth Circuit found.

Put differently, the court took the position that, while Sec. 7502 supersedes the common law mailbox rule, the presumptions afforded by the statute are not the only means available to prove delivery. Referencing Pond’s “well-pled factual allegations,” the court concluded that physical delivery was plausible enough for the district court to deny the government’s motion to dismiss. Specifically, Pond asserted that his 2013 claim was mailed in an envelope postmarked July 18, 2013, that it was included in the same envelope as the 2012 claim, and that the IRS’s denial letter for the 2013 claim referred to a “date of claims received” consistent with his allegations.

The court noted that while the IRS had no record of receiving the 2013 refund claim, “a more exhaustive effort during discovery could reveal something that the initial search missed.” In saying this, the court appeared to leave open the idea that Pond should be afforded the opportunity to use extrinsic evidence to prove physical delivery. The question remains as to what evidence the district court will allow or consider to be persuasive.

New reasoning for long-standing rules

While Pond certainly does not revive the common law mailbox rule, the opinion includes reasoning that is new to the long-standing litigation over proving physical delivery under Sec. 7502. Whether Pond could allow taxpayers to introduce extrinsic evidence to prove physical delivery in the future is far from clear. Tax practitioners, no matter how intrigued by the recent decision, should continue to be aware of Sec. 7502 requirements to ensure that clients’ returns, claims, and payments are in all cases presumed delivered and on time under the statutory rule.

Editor Notes

Mo Bell-Jacobs, J.D., is a senior manager with RSM US LLP.

For additional information about these items, contact the author(s) of this item: Alina Solodchikova, J.D., LL. M. (Alina.Solodchikova@rsmus.com), Washington, D.C.; Evan Stone, J. D., LL.M. (Evan.Stone@rsmus.com), Washington, D.C.; and Tiffany Mosely, J. D., LL.M. (Tiffany.Mosely@rsmus.com), Los Angeles.

Contributors are members of or associated with RSM US LLP.