Supreme Court Sides with IRS on Common Law Mailbox Rule

Chris Gaetano
Published Date:
Feb 26, 2020

The U.S. Supreme Court declined to hear a case in which a pair of film producers were denied a $167,333 refund because the return was apparently lost in the mail, thus upholding an appeals court decision siding with the IRS in this matter, according to Accounting Today.

The producers, Howard and Karen Baldwin (no apparent relation to the Baldwin brothers), were the pair behind the Oscar award-winning film Ray, about the musician Ray Charles. In 2011, the pair realized that they had overpaid their 2005 taxes by $167,333 and, in June 2011, filed an amended return to claim it. However, this return was apparently lost in the mail, and so by the time the October 2011 deadline came and went, the IRS had never received it. Between those two events, in August 2011, the IRS issued a new regulation that ended the common-law mailbox rule for refund claims. The service then denied the producers' claim, saying it was untimely.

The pair sued, first, in California federal district court, where the court decided that the IRS was required to give them their refund due to the common law "timely mailing" rule, which asserts that timely mailed equals timely filed. The U.S. Court of Appeals for the Ninth Circuit reversed the ruling, however, 
due to what's called the Brand X doctrine, which holds that the courts must defer to federal agencies' reasonable statutory interpretations (the August 2011 regulation), even over prior precedent.

The Supreme Court ultimately agreed with the Ninth Circuit decision and so declined to hear the case. 

This case appears to be in contrast to a recent federal court decision in Wisconsin that involved a very similar set of circumstances. A couple had been denied a $7,386 refund because the IRS said that while the couple mailed their return Oct. 11, 2016, the IRS did not receive it until Oct. 17, 2016. The couple sued, saying that the law counts the postmark date, not the received date, for determining whether something is late. While the judge at first sided with the IRS, the couple then pointed out a 2000 decision from the U.S. Court of Appeals for the Second Circuit about the “mailbox rule” and a 2001 Treasury Department regulation. In response, the judge ultimately decided against the IRS and ordered the full $7,386 refund be paid to them with seven years' interest. 

The IRS itself admitted it was wrong afterwards, saying its mistake was regrettable; the service apologized for the "resulting expense of judicial resources on the matter."

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