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.