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Baldwin v. United States

United States Court of Appeals, Ninth Circuit

April 16, 2019

Howard L. Baldwin; Karen Baldwin, Plaintiffs-Appellees,
v.
United States of America, Defendant-Appellant.

          Argued and Submitted January 8, 2019 Pasadena, California

          Appeals from the United States District Court for the Central District of California R. Gary Klausner, District Judge, Presiding D.C. No. 2:15-cv-06004-RGK-AGR

          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.

          Before: Susan P. Graber and Paul J. Watford, Circuit Judges, and Jack Zouhary, [*] District Judge.

         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 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.

          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 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. ยง 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 ...


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