In Baldwin v. United States, No. 17-55115 (filed April 16, 2019), the United States Court of Appeals for the Ninth Circuit considered the application of the Chevron doctrine (Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)), as well as the Brand X doctrine (National Cable & Telecommunications Ass’n v. Brand X Internet Services, 545 U.S. 967 (2005)), in the context of the common law “mailbox rule” and Section 7502 of the Internal Revenue Code (26 U.S.C.) (“Code”).   


In Baldwin, the plaintiffs had submitted a claim for refund of income taxes for their 2005 taxable year.  The statute of limitations for filing the claim expired October 15, 2011.  The general rule is that the timeliness of a claim for refund is determined by the date that it is physically delivered to the IRS.  Section 7502 of the Code (specifically, subsection (a)(1)) provides, however, that a document mailed to the IRS before a statutory deadline and received thereafter will be deemed to be timely received if postmarked before the deadline.  Subsection (c)(1)(a) of that section provides further that the registration of a document sent by registered mail (and, by regulations, certified mail or listed delivery service) provides “prima facie evidence that the [document] was delivered.”  The plaintiffs in Baldwin could not prove when (or if) the IRS had received the claim.  Therefore, they asserted, and supported the assertion by testimony from two employees, that they filed the claim by sending it to the IRS by regular U.S. mail in June, 2011.  Under the common law “mailbox rule,” the IRS would be presumed to have received the claim in the ordinary, regular course of business within a few days, and certainly before the October 15 deadline.  Section 7502, however, would not protect the plaintiffs because the filing date is deemed to be the date of the postmark only when the document is received after the required filing date, and provides no protection when the document is not received at all.  Thus, if the common law mailbox rule did not apply, there would be no presumption that the IRS received the claim and, therefore, the District Court would have no jurisdiction to consider it regardless of the merits.


Circuits have split on whether Congress intended Section 7502 of the Code to supplant the mailbox rule entirely or merely to be a “safe harbor” to avoid the uncertainties of proof.  The Second Circuit (Deutsch v. Commissioner, 599 F.2d 44 (1979)) and Sixth Circuit (Miller v. United States, 784 F.2d 728 (1986)) have held that Section 7205 is the exclusive exception to the physical delivery rule, while the Eighth Circuit (Estate of Wood v. Commissioner, 909 F.2d 1155 (1990)), Ninth Circuit (Anderson v. United States, 966 F.2d 487 (1992)), and Tenth Circuit (Sorrentino v. Internal Revenue Service, 383 F.3d 1187 (2004)) have held that Congress did not clearly state that it had intended to displace the mailbox rule, so that Section 7502 is only a safe harbor.  Interestingly, because the appeal in Baldwin was to the Ninth Circuit, there was binding precedent (Anderson, supra) that the mailbox rule could still be used to prove actual delivery of a document to the IRS.  However, in 2011,[1] the Treasury promulgated a regulation (§301.7502-1(e)(2), herein “the Regulation”) under Section 7502 to resolve the uncertainty among the circuits.  The Regulation provides in pertinent part that, in the absence of physical delivery, use of registered or certified mail (or designated private delivery service) is “the exclusive means to establish prima facie evidence of delivery of a document 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.  (Emphasis added.)  Thus, the question was whether the Regulation was entitled to deference in the Ninth Circuit the face of the contrary precedent in Anderson.  The District Court for the Central District of California held, based on Anderson, that Section 7502 was unambiguous in not supplanting the mailbox rule, and that the evidence supported a finding that the claim was timely mailed and, presumptively, timely received by the IRS.


The Court of Appeals, however, applied the Chevron two-step analysis and found the 2011 Regulation to be valid.  The Court held that under Step One of Chevron, Section 7502 was silent as to whether it supplanted the mailbox rule (and thus presumably was ambiguous as to that issue).  Then, applying Step Two, the Court looked to the split of the circuits (noted above) and found that a reasonable construction of the statute could arrive at either conclusion (i.e., either the mailbox rule was supplanted or it was not).  Therefore, since either conclusion was reasonable, the Treasury’s choice of interpretations must be upheld under Chevron.  The Court further held that this result did not change because of its prior holding in Anderson, supra.  Following Brand X,[2] supra, the Court stated that “[w]e did not hold in Anderson that our interpretation was the only reasonable interpretation.” (Emphasis in original.)  Thus, Anderson held that there was a “gap” to be filled in Section 7502, and under Chevron, Treasury’s decision on the choice to fill the gap was reasonable and therefore determinative of the outcome.


Baldwin presents the issue squarely as to whether a court, to which the Constitution assigns the duty to interpret the law, should defer to an administrative agency in a case involving a pure interpretation of law.  By contrast, should the level of deference be higher in cases involving regulations that involve specialized agency expertise or a policy determination that Congress has assigned to the agency?  Perhaps statutory interpretations by agencies should be given little or no deference (although binding on the agency) while determinations involving agency expertise might be given higher, perhaps Chevron or “Chevron-like”, deference.  Another approach would be to revert, for all validity determinations, to a multi-factor test similar to that set forth in National Muffler Dealers Ass’n, Inc. v. Commissioner, 440 U.S. 472 (1979), which, before its decision in Mayo Foundation for Medical Ed. and Research v. U.S., 562 U.S. 44 (2011), the Supreme Court used to determine the validity of tax regulations.  National Muffler (at p. 477) considered the validity of tax regulations as follows:

In determining whether a particular regulation carries out the congressional mandate in a proper manner, we look to see whether the regulation harmonizes with the plain language of the statute, its origin, and its purpose. A regulation may have particular force if it is a substantially contemporaneous construction of the statute by those presumed to have been aware of congressional intent. If the regulation dates from a later period, the manner in which it evolved merits inquiry. Other relevant considerations are the length of time the regulation has been in effect, the reliance placed on it, the consistency of the Commissioner's interpretation, and the degree of scrutiny Congress has devoted to the regulation during subsequent reenactments of the statute.

Interestingly, although National Muffler had been decided five years earlier, Chevron did not cite it.  In fact, the Supreme Court noted in Mayo (at p. 54, citing cases) that it had relied at various times on either National Muffler or Chevron in deciding the validity of Treasury regulations.  In Mayo, the Supreme Court finally overruled National Muffler and held that there was no reason to employ a test different from Chevron for tax regulations. 

It seems logical that the validity of all Federal regulations should be judged by the same standard, and in that regard Mayo is clearly correct.  The question, however, is what should that standard be?  Perhaps a proper balance could be struck if factors similar to those defined in National Muffler (and possibly others) were used to determine if a regulation is “reasonable” or “permissible” under Chevron Step Two, as has been suggested by some commentators.  In addition to the National Muffler-type factors, courts might also consider in granting deference if a regulation results from specialized expertise of the agency.  These suggested guidelines for applying Step Two of Chevron would provide a more meaningful basis for deference, rather than the current “all-or-nothing” approach that results from a simple “reasonable” or “permissible” test of interpretation.  It also allows a court to exercise its constitutional authority to interpret the laws, including the actions of administrative agencies promulgating regulations under those laws.


Of course, if the courts gave less deference, particularly to purely legal interpretations set forth in regulations, there is a risk that different rules would evolve in different circuits as was the case prior to Baldwin regarding the mailbox rule.  But the problem of circuit splits is not uncommon in all areas of law, and the normal recourse to create uniformity is by Supreme Court review or action by Congress.  While administrative regulations without meaningful judicial review may seem to be more expedient for interpreting statutes and creating uniformity, is that the course dictated by the Constitution?

Several current Justices of the Supreme Court have questioned the validity of Chevron-like deference.  For example, Justice Thomas questioned whether such deference limits judicial review, and therefore implicates separation of powers, by turning over to the Executive Branch the Court’s duty to interpret the laws.  Justice Thomas also questioned whether Chevron deference is an unconstitutional delegation of legislative powers belonging to Congress.  See Michigan v. EPA, 135 S.Ct. 2699, 2712-14 (2015) (Thomas, J., concurring), and cases cited therein.  While on the Tenth Circuit Court of Appeals, Justice Gorsuch shared Justice Thomas’ concerns with Chevron deference (See De Niz Robles v. Lynch, 803 F.3d 1165 (2015).  Justice Kavanaugh, while on the DC Circuit Court of Appeals, also questioned the limits of a broad application of Chevron deference (See Fixing Statutory Interpretation, 129 Harv.L.Review 2118 at 2150).  Thus, three current Justices have suggested that Chevron deference should be reconsidered, and perhaps overruled, leaving only one additional vote necessary to achieve the “Rule of Four” for certiorari by the Supreme Court.  Perhaps the Baldwin decision will provide the proper vehicle for that review.

[1]   Note that the Regulation was promulgated six years after the claim in issue was filed in 2005.  However, it was proposed in 2004 and so the retroactivity was allowed under Section 7805(b).

[2]   In Brand X, the Supreme Court ruled that the statutory interpretations of administrative agencies responsible for implementing the statute at issue were entitled to Chevron Deference,  even over precedents of the relevant United States Court of Appeals, unless the Court of Appeals had held that the statute was "unambiguous."