Howard Baldwin v. United States

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

HOWARD L. BALDWIN; KAREN Nos. 17-55115

BALDWIN, 17-55354

Plaintiffs-Appellees,

D.C. No.

v. 2:15-cv-06004-

RGK-AGR

UNITED STATES OF AMERICA,

Defendant-Appellant. OPINION

Appeals from the United States District Court

for the Central District of California

R. Gary Klausner, District Judge, Presiding

Argued and Submitted January 8, 2019

Pasadena, California

Filed April 16, 2019

Before: Susan P. Graber and Paul J. Watford, Circuit

Judges, and Jack Zouhary, * District Judge.

Opinion by Judge Watford

*

The Honorable Jack Zouhary, United States District Judge for the

Northern District of Ohio, sitting by designation.

2 BALDWIN V. UNITED STATES

SUMMARY **

Tax

The panel reversed the district court’s judgment, after a

bench trial, in favor of taxpayers in their tax refund action,

and remanded with instructions to dismiss because taxpayers

had not filed a timely claim for a refund with the Internal

Revenue Service (IRS).

As a prerequisite to bringing their refund action,

taxpayers first had to file a timely amended return, claiming

the refund, with the IRS. In this case, the IRS did not timely

receive such a return. The district court credited the

testimony of two employees of taxpayers to find that, under

the common-law mailbox rule, the amended return had been

timely filed.

The common-law mailbox rule provides that proof of

proper mailing—including by testimonial or circumstantial

evidence—gives rise to a rebuttable presumption that the

document was physically delivered to the addressee in the

time such a mailing would ordinarily take to arrive. In

contrast, Internal Revenue Code § 7502 allows documents to

be deemed timely filed only if they are actually delivered to

the IRS and postmarked on or before the deadline. For

documents sent by registered mail, § 7502 provides a

presumption that the document was delivered even if the IRS

claims not to have received it, so long as the taxpayer

produces the registration as proof. Under Treasury

Regulation § 301.7502-1(e)(2), IRC § 7502 provides the

**

This summary constitutes no part of the opinion of the court. It

has been prepared by court staff for the convenience of the reader.

BALDWIN V. UNITED STATES 3

exclusive means to prove delivery, rendering the common-

law mailbox rule unavailable.

The panel accorded Chevron deference to Treasury

Regulation § 301.7502-1(e)(2) as a permissible construction

of IRC § 7502. Because that regulation applies to this case,

the panel reversed the district court’s judgment and

remanded with instructions to dismiss, and reversed the

award of litigation costs to taxpayers because they were no

longer the prevailing party.

COUNSEL

Nathaniel S. Pollock (argued), Joan I. Oppenheimer, and

Gilbert S. Rothenberg, Attorneys; Richard E. Zuckerman,

Principal Deputy Assistant Attorney General; Tax Division,

United States Department of Justice, Washington, D.C.; for

Defendant-Appellant.

Robert Wayne Keaster (argued), Chamberlin & Keaster

LLP, Encino, California, for Plaintiffs-Appellees.

OPINION

WATFORD, Circuit Judge:

Howard and Karen Baldwin filed this action to obtain a

refund of taxes they paid for the 2005 tax year. After a bench

trial, the district court entered judgment in their favor,

awarding them a refund of roughly $167,000 plus litigation

costs of $25,000. We conclude that the district court lacked

the authority to hear this suit. As a prerequisite to bringing

this action, the Baldwins first had to file a timely claim for a

4 BALDWIN V. UNITED STATES

refund with the Internal Revenue Service (IRS). They filed

their claim too late. As a result, we must reverse the district

court’s judgment and remand with instructions to dismiss the

case.

I

Because the merits of the underlying tax dispute are

irrelevant to our disposition, we provide only a brief

summary of the facts. The Baldwins’ 2007 tax return

reported a net operating loss of approximately $2.5 million

from their movie production business. They wanted to carry

that loss back to the 2005 tax year in order to offset their

2005 tax liability. Based on that carryback, the Baldwins

prepared an amended 2005 tax return claiming entitlement

to a refund of approximately $167,000.

To obtain a refund, the Baldwins were required to file

their amended 2005 tax return by October 15, 2011—three

years from the extended due date for their 2007 tax return.

See 26 U.S.C. § 6511(b)(1), (d)(2)(A). The Baldwins assert

that they sent their amended 2005 tax return to the IRS by

U.S. mail in June 2011, well before the October 15th

deadline. But the IRS never received that return, or any other

return postmarked by the October 15, 2011, deadline. The

IRS did eventually receive an amended 2005 return from the

Baldwins in July 2013, but it was postmarked after the

statutory deadline had passed. The IRS accordingly denied

the Baldwins’ refund claim as untimely.

The Baldwins then brought this action against the United

States in the district court. Although the doctrine of

sovereign immunity would ordinarily bar such a suit, the

United States has waived its immunity from suit by allowing

a taxpayer to file a civil action to recover “any internal-

revenue tax alleged to have been erroneously or illegally

BALDWIN V. UNITED STATES 5

assessed or collected.” 28 U.S.C. § 1346(a)(1). Under the

Internal Revenue Code (IRC), though, no such action may

be maintained in any court “until a claim for refund or credit

has been duly filed” with the IRS, in accordance with IRS

regulations. 26 U.S.C. § 7422(a); see United States v. Dalm,

494 U.S. 596, 609 (1990). To be “duly filed,” a claim for

refund must be filed within the time limit set by law. Yuen

v. United States, 825 F.2d 244, 245 (9th Cir. 1987) (per

curiam). Here, as noted above, the Baldwins had to file their

refund claim (i.e., their amended 2005 tax return) by

October 15, 2011.

At this point, before proceeding further, a detour is

necessary to explain when a document, such as a tax return,

is deemed “filed” with the IRS.

Before 1954, the law treated tax documents as timely

filed only if they were physically delivered to the IRS by the

applicable deadline. Anderson v. United States, 966 F.2d

487, 490 (9th Cir. 1992); see United States v. Lombardo,

241 U.S. 73, 76 (1916). This physical-delivery rule left

taxpayers who mailed their documents vulnerable to the

vagaries of the postal service; documents could be delayed

or not delivered at all through no fault of the taxpayer. To

mitigate the harshness of the physical-delivery rule, some

courts responded by applying the common-law mailbox rule.

See, e.g., Detroit Automotive Products Corp. v.

Commissioner of Internal Revenue, 203 F.2d 785, 785–86

(6th Cir. 1953) (per curiam); Arkansas Motor Coaches, Ltd.

v. Commissioner of Internal Revenue, 198 F.2d 189, 191 (8th

Cir. 1952). Under the common-law mailbox rule, proof of

proper mailing—including by testimonial or circumstantial

evidence—gives rise to a rebuttable presumption that the

document was physically delivered to the addressee in the

time such a mailing would ordinarily take to arrive.

6 BALDWIN V. UNITED STATES

Philadelphia Marine Trade Association v. Commissioner of

Internal Revenue, 523 F.3d 140, 147 (3d Cir. 2008);

Anderson, 966 F.2d at 491.

In 1954, Congress addressed some of the problems

caused by the physical-delivery rule by enacting IRC § 7502.

Section 7502(a)(1) carves out an exception to the physical-

delivery rule for tax documents sent and delivered by U.S.

mail. It provides that if a document is received by the IRS

after the applicable deadline, it will nonetheless be deemed

to have been delivered on the date that the document is

postmarked:

If any return, claim, statement, or other

document required to be filed, or any

payment required to be made, within a

prescribed period or on or before a prescribed

date under authority of any provision of the

internal revenue laws is, after such period or

such date, delivered by United States mail to

the agency, officer, or office with which such

return, claim, statement, or other document is

required to be filed, or to which such payment

is required to be made, the date of the United

States postmark stamped on the cover in

which such return, claim, statement, or other

document, or payment, is mailed shall be

deemed to be the date of delivery or the date

of payment, as the case may be.

26 U.S.C. § 7502(a)(1). This exception means that a

document will be deemed timely filed so long as two things

are true: (1) the document is actually delivered to the IRS,

even if after the deadline; and (2) the document is

postmarked on or before the deadline. If the document is

BALDWIN V. UNITED STATES 7

never delivered at all—say, because it gets lost in the mail—

the exception by its terms does not apply. Miller v. United

States, 784 F.2d 728, 730 (6th Cir. 1986) (per curiam).

To protect against a failure of delivery, some taxpayers

choose to send documents by registered mail. Section

7502(c)(1) provides an exception to the physical-delivery

rule applicable to documents sent in that manner. It provides

that when a document is sent by registered mail, the

registration will serve as prima facie evidence that the

document was delivered, and the date of registration will be

treated as the postmark date:

For purposes of this section, if any return,

claim, statement, or other document, or

payment, is sent by United States registered

mail—

(A) such registration shall be prima

facie evidence that the return, claim,

statement, or other document was

delivered to the agency, officer, or office

to which addressed; and

(B) the date of registration shall be

deemed the postmark date.

26 U.S.C. § 7502(c)(1). Subsection (B) provides, in effect,

that the same exception to the physical-delivery rule

afforded under § 7502(a)(1) for documents sent by regular

mail extends to documents sent by registered mail, with the

registration serving the same function as the postmark.

Subsection (A), however, goes further. It provides a

presumption that a document sent by registered mail was

8 BALDWIN V. UNITED STATES

delivered even if the IRS claims not to have received it, so

long as the taxpayer produces the registration as proof. 1

In the decades following the enactment of IRC § 7502,

the courts of appeals reached conflicting decisions as to what

effect, if any, the statute had on application of the common-

law mailbox rule. On one side of the split, some courts held

that § 7502 supplies the exclusive exceptions to the physical-

delivery rule, thereby displacing the common-law mailbox

rule altogether. See Miller, 784 F.2d at 730–31; Deutsch v.

Commissioner of Internal Revenue, 599 F.2d 44, 46 (2d Cir.

1979). These courts noted that § 7502 evinces a preference

“for an easily applied, objective standard”—a preference

incompatible with the common-law mailbox rule, which

tolerates testimonial and circumstantial evidence to prove

when a document was mailed (and thus presumptively

delivered). Deutsch, 599 F.2d at 46.

On the other side of the split, some courts reasoned that

because § 7502 was meant to mitigate the harshness of the

physical-delivery rule, it is best read as providing a safe

harbor, not as limiting resort to alternative exceptions to the

physical-delivery rule. See Sorrentino v. IRS, 383 F.3d

1187, 1193 (10th Cir. 2004); Estate of Wood v.

Commissioner of Internal Revenue, 909 F.2d 1155, 1161

(8th Cir. 1990). Courts on this side of the split relied on the

principle that statutes should not be read as displacing the

common law unless Congress clearly so intended, while

noting that Congress did not clearly state in § 7502 that it

1

Although not at issue here, IRC § 7502(c)(2) and (f)(3) authorize

the Treasury Secretary to establish, by regulation, equivalent exceptions

to the physical-delivery rule for documents sent by certified mail,

electronic filing, and private delivery services. 26 U.S.C. § 7502(c)(2),

(f)(3).

BALDWIN V. UNITED STATES 9

intended to displace the common-law mailbox rule. See

Estate of Wood, 909 F.2d at 1160. Our circuit adopted this

latter line of reasoning. In Anderson v. United States,

966 F.2d 487 (9th Cir. 1992), we “decline[d] to read

section 7502 as carving out exclusive exceptions to the old

common law physical delivery rule.” Id. at 491.

This circuit split left the law in an undesirable state, as it

allowed similarly situated taxpayers to be treated differently

depending on where they lived. In August 2011, the

Treasury Department sought to resolve the split by

promulgating an amended version of Treasury Regulation

§ 301.7502-1(e). The amended regulation interprets § 7502

as creating the exclusive exceptions to the physical-delivery

rule:

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 [private delivery service], 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.

26 C.F.R. § 301.7502-1(e)(2)(i) (emphasis added). The

regulation makes clear that, unless a taxpayer has direct

proof that a document was actually delivered to the IRS, IRC

§ 7502 provides the exclusive means to prove delivery. In

other words, recourse to the common-law mailbox rule is no

longer available.

10 BALDWIN V. UNITED STATES

With that background in mind, we can now return to the

facts of this case. In the district court, the Baldwins did not

dispute that the amended 2005 tax return they claim to have

mailed in June 2011 was never received by the IRS. The

Baldwins therefore sought to rely on the common-law

mailbox rule to establish that the document was

presumptively delivered to the IRS in June 2011, shortly

after they mailed it. They offered the testimony of two of

their employees, who had been tasked with mailing the

document on the Baldwins’ behalf. The employees

explained that they deposited the amended 2005 return in the

mail at the post office in Hartford, Connecticut, on June 21,

2011. Under the common-law mailbox rule, that testimony,

if credited by the court, would give rise to a rebuttable

presumption that the amended return was delivered to the

IRS well before the October 15, 2011, deadline.

The district court credited the testimony of the Baldwins’

employees and found, on the basis of the common-law

mailbox rule, that the Baldwins’ claim for a refund had been

timely filed. The court rejected the government’s argument

that Treasury Regulation § 301.7502-1(e)(2) barred

application of the common-law mailbox rule. The court

viewed IRC § 7502 as unambiguously supplementing, rather

than supplanting, the common-law mailbox rule, thus

leaving no room for the agency to adopt the construction of

the statute reflected in Treasury Regulation § 301.7502-

1(e)(2). Whether the district court correctly declared that

portion of the Treasury Regulation invalid is the principal

focus of the government’s appeal.

II

In deciding whether Treasury Regulation § 301.7502-

1(e)(2) is valid, we employ the familiar two-step analysis

under Chevron U.S.A. Inc. v. Natural Resources Defense

BALDWIN V. UNITED STATES 11

Council, Inc., 467 U.S. 837 (1984). We ask first whether

“Congress has directly spoken to the precise question at

issue.” Id. at 842. If it has, Congress’ resolution of the issue

controls and the agency is not free to adopt an interpretation

at odds with the plain language of the statute. But if the

statute is silent or ambiguous on the question at hand, we

then ask whether the agency’s interpretation is “based on a

permissible construction of the statute.” Id. at 843.

At step one of the analysis, we conclude that IRC § 7502

is silent as to whether the statute displaces the common-law

mailbox rule. In particular, with respect to the question

relevant here, the statute does not address whether a taxpayer

who sends a document by regular mail can rely on the

common-law mailbox rule to establish a presumption of

delivery when the IRS claims not to have received the

document. The statute does afford a presumption of delivery

when a taxpayer sends a document by registered mail,

26 U.S.C. § 7502(c)(1)(A), and it authorizes the creation of

similar rules for certified mail, electronic filing, and private

delivery services. § 7502(c)(2), (f)(3). But as to documents

sent by regular mail, the statute is conspicuously silent. 2

At step two of the Chevron analysis, the remaining

question is whether Treasury Regulation § 301.7502-1(e)(2)

is based on a permissible construction of the statute. We

conclude that it is. As reflected by the circuit split that

developed on this issue, Congress’ enactment of IRC § 7502

could reasonably be construed in one of two ways: as

intended merely to supplement the common-law mailbox

2

The statute is also silent as to whether any evidence other than the

objective evidence described in the statute—the registration for

registered mail, and equivalents for certified mail, electronic filing, and

private delivery service—may raise a presumption of delivery.

12 BALDWIN V. UNITED STATES

rule, or to supplant it altogether. The Treasury Department

chose the latter construction by interpreting IRC § 7502 to

provide the sole means by which taxpayers may prove timely

delivery in the absence of direct proof of actual delivery.

That construction of the statute is reasonable in light of the

principle that “where Congress explicitly enumerates certain

exceptions to a general prohibition, additional exceptions are

not to be implied, in the absence of evidence of a contrary

legislative intent.” Hillman v. Maretta, 569 U.S. 483, 496

(2013) (alteration omitted); see also Syed v. M-I, LLC,

853 F.3d 492, 501 (9th Cir. 2017). Given that the purpose

of enacting IRC § 7502 was to provide exceptions to the

physical-delivery rule, it is reasonable to conclude that

“Congress considered the issue of exceptions and, in the end,

limited the statute to the ones set forth.” United States v.

Johnson, 529 U.S. 53, 58 (2000).

In arguing that the Treasury Department unreasonably

construed IRC § 7502 as having displaced the common-law

mailbox rule, the Baldwins invoke a different principle of

statutory interpretation, which provides that “the common

law . . . ought not to be deemed repealed, unless the language

of a statute be clear and explicit for this purpose.” Norfolk

Redevelopment and Housing Authority v. Chesapeake &

Potomac Telephone Co., 464 U.S. 30, 35 (1983) (alteration

and internal quotation marks omitted). But the mere fact that

dueling principles of statutory interpretation support

opposing constructions of a statute does not prove, without

more, that the agency’s interpretation is unreasonable. The

question remains whether the agency has adopted a

permissible construction of the statute, taking into account

all of the interpretive tools available. As is true in this case,

an agency’s construction can be reasonable even if another,

equally permissible construction of the statute could also be

upheld.

BALDWIN V. UNITED STATES 13

Finally, our prior interpretation of IRC § 7502 in

Anderson does not bar our decision to defer to the agency’s

conflicting, but nonetheless reasonable, construction of the

statute. As noted above, before the relevant amendment of

Treasury Regulation § 301.7502-1(e), we “decline[d] to read

section 7502 as carving out exclusive exceptions to the old

common law physical delivery rule.” Anderson, 966 F.2d at

491. But “[a] court’s prior judicial construction of a statute

trumps an agency construction otherwise entitled to Chevron

deference only if the prior court decision holds that its

construction follows from the unambiguous terms of the

statute and thus leaves no room for agency discretion.”

National Cable & Telecommunications Association v. Brand

X Internet Services, 545 U.S. 967, 982 (2005). 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.

III

The Baldwins contend that even if Treasury Regulation

§ 301.7502-1(e)(2) is valid, it does not apply in this case.

They offer two arguments to that end, both of which we

reject.

First, the Baldwins argue that IRC § 7502 and Treasury

Regulation § 301.7502-1(e)(2) apply only when a tax

document was sent before, but received after, the applicable

due date. In their view, these provisions do not apply when,

as here, a tax document was never received at all. The

Baldwins thus contend that even if Treasury Regulation

§ 301.7502-1(e)(2) prohibits recourse to the common-law

mailbox rule, that prohibition does not apply to them because

they used the mailbox rule not to prove that a late-received

14 BALDWIN V. UNITED STATES

document was mailed in time, but instead to prove that a

document that the IRS apparently never received was in fact

delivered.

The Baldwins are mistaken. To be sure, § 7502

addresses situations in which tax documents are mailed

before, but not received until after, the due date. Subsection

(a)(1) provides that in such instances the document will be

deemed timely filed so long as it was postmarked before the

due date. 26 U.S.C. § 7502(a)(1). But § 7502 also addresses

situations in which the IRS claims not to have received a tax

document at all. Subsection (c)(1)(A) provides that, for

documents sent by registered mail, the registration will be

treated as “prima facie evidence that the [document] was

delivered.” § 7502(c)(1)(A). That provision can apply only

when the IRS claims not to have received a document. The

Baldwins are therefore wrong in contending that IRC § 7502

and Treasury Regulation § 301.7502-1(e)(2)—which

interprets the statute to prohibit recourse to the common-law

mailbox rule—do not apply to situations like theirs in which

a document was never delivered to the IRS.

Second, the Baldwins argue that Treasury Regulation

§ 301.7502-1(e)(2) does not apply in this case because it was

promulgated in August 2011, two months after they

allegedly mailed their amended 2005 return in June 2011.

This argument also fails. See Maine Medical Center v.

United States, 675 F.3d 110, 118 n.14 (1st Cir. 2012)

(rejecting identical argument). The regulation expressly

provides that “Section 301.7502-1(e)(2) will apply to all

documents mailed after September 21, 2004,” the date that

the current text of the regulation was proposed. 26 C.F.R.

§ 301.7502-1(g)(4); Timely Mailed Treated as Timely Filed,

69 Fed. Reg. 56,377-01 (Sept. 21, 2004). That retroactivity

provision complies with IRC § 7805(b), which authorizes

BALDWIN V. UNITED STATES 15

the Treasury Secretary to make regulations retroactively

applicable as far back as the date of their proposal. 26 U.S.C.

§ 7805(b)(1)(B); see Bowen v. Georgetown University

Hospital, 488 U.S. 204, 208 (1988). Our prior decision in

Anderson is irrelevant to the issue of retroactivity, as

§ 7805(b) does not contain an exception barring the

retroactive application of a valid regulation in judicial

circuits where the regulation contravenes a prior circuit

decision.

* * *

Because Treasury Regulation § 301.7502-1(e)(2) is valid

and applicable in this case, and because timely filing is a

mandatory requirement for maintaining tax refund suits, see

26 U.S.C. § 7422(a), we reverse the judgment below and

remand with instructions to dismiss this case. As the

Baldwins are no longer prevailing parties, we also reverse

the award of litigation costs.

REVERSED and REMANDED.