The case of Park v. Commissioner, Dk. No. 3312-22S shows a bias in the Tax Court’s electronic filing system that disadvantages petitioners in time zones to the west of Washington, D.C. Think of the Park decision as the Tax Court’s equivalent of the View of the World from 9th Avenue. It also serves as a reminder of Tax Court practices we have discussed before regarding the policing of cases to determine timeliness discussed here and here, as well as burdens placed by the IRS on electronic tax return filers we have discussed previously here and here. The Parks, who live in California, have their Tax Court case dismissed even though they filed on the 90th day viewed from the lens of California. It is dismissed because it arrived at the Tax Court two minutes after the East Coast based deadline. Let’s look at the facts in more detail.
The IRS sent the Parks a notice of deficiency (SNOD) on November 29, 2021. The Court says that the SNOD stated the last date to file the petition was February 28, 2022. Note that 90 from November 29 would be February 27. In 2021 February 27 was a Sunday moving the last date to file to Monday, February 28 pursuant to IRC 7503.
The court states the petition was filed on Tuesday, March 1, 92 days after the mailing of the SNOD. In this case, the Court finds that the filing occurred one day after the last date to file the petition.
After the filing of the petition, the IRS answered the case on April 25, 2022, within the 60-day time period for filing an answer. The parties submitted a proposed stipulated decision on May 11, 2022, which would have resolved the case. The timing of the proposed stipulated decision suggests that the petitioners convinced the respondent very quickly that the notice was wrong. It’s possible that the IRS convinced petitioners that quickly that the notice was right, but in my experience, cases that settle this quickly usually do so because the petitioner provides information that immediately convinces the Chief Counsel attorneys that they do not owe the tax shown on the SNOD. Kudos to the Chief Counsel attorneys for working the case so quickly acknowledging the proper result.
The Tax Court initially filed the stipulated decision but later struck it from the docket and, seven months later, on December 11, 2022, issued an order to show cause why the Court should not dismiss the case for lack of jurisdiction. I don’t know the issue in this case because I have not ordered the documents, but if this were a case in which taxpayers were receiving a refund note that the refund would have been held by the IRS, awaiting the signature of the judge on the decision document. Because the stipulated decision was filed almost immediately after the answer, this case would be on the Court’s general docket, unassigned to a specific judge, and under the office of the Chief Judge.
The parties responded to the order by the end of December. On February 22, 2023, nine months after the parties had reached an agreement in this case, the Court dismissed it. Assuming I am right that the IRS agreed that the taxpayer did not owe the amount set out in the SNOD, the dismissal will not cause the taxpayer problems. The IRS will honor the agreement, which means it will not make an assessment of the deficiency proposed in the SNOD, and it will pay a refund if any is due. So, the taxpayer in this situation will not be harmed by the dismissal.
Why did the court dismiss the case? Under its interpretation of its jurisdiction, whether that’s 6213 or 6214, depending on the judge, the taxpayer must file a timely petition, and the court must dismiss an untimely filed case even where the parties have reached an agreement. The Court explains why it views this petition as late:
On December 30, 2022, petitioners filed a Response to Order to Show Cause, in which they argue that the petition was filed at 12:01 a.m. on March 1, 2022, and the Court should consider that the petition was submitted from the State of California at 9:01 p.m. on February 28, 2022. In addition, Petitioners also argue that they last saved the petition at 8:54 p.m. on February 28, 2022, to their computer and the petition was likely submitted by them before the petition was received by the Court.
In pertinent part, the Court’s DAWSON Petitioner Training Guide, at page 10, states, “The Court MUST receive your electronically filed Petition no later than 12:59 [sic] pm Eastern Time on the last date to file. Petitions received after this time are considered untimely and your case may be dismissed for lack of jurisdiction.” A copy of the DAWSON Petitioner Training Guide is posted in the Rules & Guidance section of the Court’s website at www.ustaxcourt.gov.
The Court’s quote from page 10 of its guide contains a misstatement. The guide says the electronic petition must be received not later than 11:59 pm Eastern Time. Notice that the petition must be received by that time. It’s not the time the petitioner sends the petition. I have never checked to see if there was a difference between the time I sent a document to the court and the time the court received it. The docket sheet does not record time down to the minute but lists the day. The “farm” internet I have is quite slow, and sometimes I think documents I send to others or that others send to me are sent by the electronic equivalent of the Pony Express rather than going and coming instantaneously.
I would certainly never recommend waiting until almost midnight on the day a petition is due in order to transmit a petition for numerous reasons. The electronic submission rule adopted by the Tax Court, however, disadvantages all petitioners who do not live on the East Coast. This rule is not required by the statute or at least not facially required. The Park case is not a good case to challenge this rule, but even if Hallmark correctly states the Tax Court’s jurisdiction regarding timeliness, the Tax Court’s electronic filing rule might not stand up to a challenge based on jurisdiction.
So, the Parks filed two minutes late. The Tax Court took seven months to bring this to the parties’ attention. If the time period is not jurisdictional, the Court does not have to police its docket filings down to the minute. It might still find the Parks lacked a good excuse for filing two minutes late and dismiss their case, but it would only do so if the IRS raised the issue. Is this the way we want the Tax Court to spend its time and the time of the parties?
Is this the way we want to treat taxpayers west of the Eastern Time Zone? The Tax Court wants to promote electronic filing. Kicking out a petitioner who may or may not have transmitted the document before 9:00 PM Pacific Time does not seem like a way to promote electronic filing of petitions. The Tax Court did not choose this rule because it is East Coast centric. It did so to avoid petitioners and practitioners on the East Coast playing games and getting extra time to file based on the time zones in the western United States that can be several hours after the deadline in the east.
I don’t know if the Court has the IT capability to know the time zone from which a petition is submitted or if it would be comfortable requiring a statement from the petitioner regarding that time zone. A petitioner on the East Coast could get extra time by electronically transmitting the petition to a friend in Hawaii and having them go to the post office or an approved private delivery service and getting the petition date stamped before the end of the 90th day.
Petitioners need to check to make sure their electronic transmission has appeared on the Court’s docket, but documents are not immediately posted there. It can, at times, take days before a document is posted. What if the Parks transmitted their petition on February 25, 2022, but something in the electronic transmission on their end, the Court’s end, or somewhere in between held up its receipt until March 1? Under the electronic filing rules, the Court would dismiss their case.
Unlike the electronic filing of a tax return, where you generally get a ping back within a day, (and are given a grace period to perfect a rejected return and still have it treated as timely) it can take longer for a petition to appear as docketed, and the “ping back” that it has been accepted is the docket entry if it is accepted. This has similarities to the problems the IRS creates when it penalizes taxpayers who timely file electronic returns, but something goes wrong in the transmission and their preparer does not inform the taxpayer of the problem, potentially creating large penalties.