Garretson v. United States of America et al

MOTION to dismiss for lack of jurisdiction or Alternatively, MOTION for summary judgment

M.D. Fla.July 22, 2016

1 14196219.1 IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF FLORIDA ORLANDO DIVISION MARY N. GARRETSON, ) ) Plaintiff, ) ) v. ) ) UNITED STATES OF AMERICA, ) ) Defendant. ) _________________________________ ) Case No. 6:16-cv-00719-GKS-KRS DEFENDANT’S MOTION TO DISMISS OR ALTERNATIVELY FOR SUMMARY JUDGMENT Pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6), defendant United States of America moves the Court to dismiss this action on the grounds that the Court lacks subject matter jurisdiction over this case and plaintiff’s complaint fails to state a claim upon which relief may be granted. Alternatively, pursuant to Fed. R. Civ. P. 56, defendant moves for summary judgment because the allegations coupled with the Certificate of Assessments and Payments attached as Exhibit 1 to this motion, the documents attached to Exhibit 2 to this motion, and accompanying memorandum demonstrate that there is no dispute over any material fact and defendant is entitled to judgment as a matter of law. SUMMARY OF ARGUMENT I. In order for a court to have subject matter jurisdiction over a suit for a refund of federal taxes, a plaintiff must file an action within two years after receiving a notice from the Internal Revenue Service that her administrative claim for refund has been disallowed. Because Case 6:16-cv-00719-GKS-KRS Document 10 Filed 07/22/16 Page 1 of 11 PageID 30 2 14196219.1 plaintiff filed this action more than two years after receiving such notice, the Court lacks subject matter jurisdiction over this action. II. The Internal Revenue Code imposes certain “look-back” periods which preclude a taxpayer from receiving refunds of amounts paid too long before the taxpayer filed a return or claim for refund. The payments that plaintiff seeks refunded were made beyond the pertinent look-back period. STATEMENT OF UNDISPUTED FACTS 1. In this action, plaintiff seeks a refund of federal income tax that she allegedly overpaid with respect to calendar year 2008. 2. Plaintiff filed her federal income tax return for calendar year 2008 on December 26, 2012.1 Exh. 1; Attachment A to Exh. 2. 3. On her federal income tax return for 2008, plaintiff reported tax in the amount of $4,268 and payments in the amount of $29,403. Attachment A to Exh. 2 at 2. 4. The payments or credits that had posted to the account for her federal income tax liability for 2008 consist of the following: 1 In her complaint, plaintiff refers to an earlier unsigned Form 1040 that was rejected by the Internal Revenue Service. An unsigned Form 1040 is not a valid return. Treas. Reg. § 301.6402-3(a)(5); In re Justice, 817 F.3d 738, 741 (11th Cir. 2016) (citing Beard v. Comm'r of Internal Revenue, 82 T.C. 766, 777, 785 (1984)) (noting that a tax return “must be executed under penalty of perjury,” meaning signed by the taxpayer). Such a document is of no consequence. Case 6:16-cv-00719-GKS-KRS Document 10 Filed 07/22/16 Page 2 of 11 PageID 31 3 14196219.1 Date as shown on Certificate of Assessments and Payments Amount Type 4/15/2009 $8,803 Withholding 4/13/2009 $2,200 Subsequent Payment 4/15/2008 $20,000 Overpayment from prior tax period 4/15/2009 $600 Refundable credit Total $31,6032 Exh. 1; Attachment A to Exh. 2 at 2. 5. The payments and credit that were applied to plaintiff’s federal income tax liability for 2008 exceeded the amount of the tax reported on the return by $27,4335. Id. 6. Plaintiff’s federal income tax return for 2008 requested that the IRS apply $22,135 of that overpayment as an estimated payment toward her income tax liability for 2009 and refund $3,000 to her. Attachment A to Exh. 2 at 2. 7. On December 9, 2013, the Internal Revenue Service denied plaintiff’s and issued to her a notice of claim disallowance. Attachment B to Exh. 2. 8. The notice of claim disallowance advised plaintiff of her right to an administrative appeal, but also stated If you don’t agree with our decision, you may file suit to recover tax, penalties, or other amounts, with the United States District Court having jurisdiction or with the United States Court of Federal Claims. These courts are part of the judiciary branch of the federal government and have no connection with the Internal Revenue Service. 2 In reporting on her return the payments she had made, plaintiff apparently overlooked the payment of $2,200. Case 6:16-cv-00719-GKS-KRS Document 10 Filed 07/22/16 Page 3 of 11 PageID 32 4 14196219.1 The law permits you to do this within 2 years from the date of this letter. If you decide to appeal our decision first, the 2-year period still begins from the date of this letter Id. (Emphasis added). 9. Plaintiff administratively appealed the disallowance of her claim for refund. Attachment B to Exh. 2. 10. By letter dated July 17, 2014, the IRS Office of Appeals upheld the disallowance of plaintiff’s claim. The letter stated as follows: Our office has completed its review of your claim for abatement and/or refund of taxes that we have charged you. Based on the information submitted, there is no basis to allow any part of your claim. You may pursue this matter further by filing suit in either the United States District Court or the United States Court of Federal Claims. If you decide to do this, you must file the suit within two-years from the date on the letter denying your claim, which the Memphis IRS Campus mailed to you on December 9, 2013. However, if you signed a waiver of the notice of disallowance (Form 2297), the two-year period began on the date you filed that waiver. Please note: Your two-year period has NOT been shortened or extended by our reconsideration of your claim. Attachment C to Exh. 2. (Emphasis added). 11. Plaintiff filed this action on April 27, 2016, more than two years after December 9, 2013. ARGUMENT I. Because plaintiff filed this action more than two years after the date that the IRS issued a notice disallowing her claim for refund, the Court lacks subject matter jurisdiction over this action. As sovereign, “the United States may not be sued without its consent and [the] existence of consent is a prerequisite for jurisdiction.” United States v. Mitchell, 463 U.S. 206, 212 (1983). Case 6:16-cv-00719-GKS-KRS Document 10 Filed 07/22/16 Page 4 of 11 PageID 33 5 14196219.1 Such a waiver must be explicit and is strictly construed in favor of the United States. United States v. Nordic Village, Inc., 503 U.S. 30, 33 (1992). Moreover, “[t]he terms of [the United States’] consent to be sued in any court define that court’s jurisdiction to entertain the suit.” United States v. Sherwood, 312 U.S. 584, 586–87 (1941). A statute of limitations requiring that a suit against the government be brought within a certain period of time is one of those terms. United States v. Dalm, 494 U.S. 596, 608 (1990). Congress has statutorily waived this immunity when taxpayers file suit for a refund of federal taxes. 26 U.S.C. §7422(a); United States v. Williams, 514 U.S. 527, 531 (1995). The district courts of the United States have original jurisdiction over any suit filed against the United States claiming recovery of a federal tax “alleged to have been erroneously or illegally assessed or collected . . . or any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws.” 28 U.S.C. § 1346(a)(1). But Congress also set a limitations period for filing such refund actions. Specifically, Section 6532(a)(1) of the Internal Revenue Code states: (1) General rule.--No suit or proceeding under section 7422(a) for the recovery of any internal revenue tax, penalty, or other sum, shall be begun before the expiration of 6 months from the date of filing the claim required under such section unless the Secretary renders a decision thereon within that time, nor after the expiration of 2 years from the date of mailing by certified mail or registered mail by the Secretary to the taxpayer of a notice of the disallowance of the part of the claim to which the suit or proceeding relates. (Emphasis added). Further, Section 6532(a)(4) states: (4) Reconsideration after mailing of notice.--Any consideration, reconsideration, or action by the Secretary with respect to such claim following the mailing of a notice by certified mail or registered mail of disallowance shall not operate to extend the period within which suit may be begun. Case 6:16-cv-00719-GKS-KRS Document 10 Filed 07/22/16 Page 5 of 11 PageID 34 6 14196219.1 It is beyond dispute that “the scope of this waiver of sovereign immunity is limited by the conditions attached to it by Congress; among these conditions is the two-year statute of limitations prescribed under 26 U.S.C. § 6532(a)(1).” First Alabama Bank, N.A. v. United States, 981 D. 2d 1226, 1228 (11th Cir. 1989). See also, Rosser v. United States, 9 F. 3d 1519, 1521 (11th Cir. 1993) (“the statute of limitations for instituting tax refund suits contained in 26 U.S.C. § 6532(a)(1) conditions [the waiver of sovereign immunity]”); Companagnoni v. United States, 173 F. 3d 1369, 1370 n3 (11th Cir. 1999)(“the court does not have subject matter jurisdiction over a suit against the United States that is barred by the statute of limitations ”). Here, the notice of claim disallowance advised plaintiff that the forum for filing a refund action were either the United States District Court or the Court of Federal Claims and that the suit was required to be filed within two years of the date of the notice, whether or not she sought review from the IRS Office of Appeals. When it upheld the claim disallowance, the Office of Appeals reminded plaintiff that she was required to file a refund action within two years of December 9, 2013, the date that the notice of claim disallowance was issued. Plaintiff simply did not comply with the statute of limitations. As a result, the Court lacks subject matter jurisdiction over this action.3 3 It is of no consequence that on December 9, 2015, plaintiff filed a petition with the Tax Court in an attempt to obtain a refund. Congress has conferred jurisdiction over federal tax refund actions on federal district courts and the Court of Federal Claims. 28 U.S.C. Section 1346(a)(1). The Tax Court’s jurisdiction is limited by statute. Breman v. Commissioner, 66 T.C. 61, 66 (1976). The Tax Court has jurisdiction to determine an overpayment of tax and direct a refund only if a petition is timely filed in response to a notice of deficiency issued pursuant to 26 U.S.C. Section 6212. See, 26 U.S.C. Section 6213(a). Because no notice of deficiency had been issued, the Tax Court dismissed the petition for lack of jurisdiction. Attachment D to Exh. 2. In doing so, the (continued...) Case 6:16-cv-00719-GKS-KRS Document 10 Filed 07/22/16 Page 6 of 11 PageID 35 7 14196219.1 II. Even if plaintiff had timely filed suit, the Court would still jack jurisdiction to award a refund because all of the payments applied to plaintiff’s account pertaining to her federal income tax liability for 2008 were made more than three and one/half years before she filed her return for 2012. Prior to filing such a suit, a taxpayer must comply with the “tax refund scheme established in the [Internal Revenue] Code.” United States v. Clintwood Elkhorn Min. Co., 553 U.S. 1, 4 (2008). See also Mutual Assurance Company v. United States, 56 F. 3d 1353, 1356 (11th Cir. 1995)— Courts have consistently held that a taxpayer’s filing of an administrative refund claim with the IRS in accordance with the relevant provisions of the Internal Revenue Code is a jurisdictional prerequisite to the maintenance of a tax refund suit. (Emphasis added). The relevant provisions require that a tax refund suit be preceded by a proper claim for refund being filed with the Internal Revenue Service. 26 U.S.C. § 7422(a). The claim must be filed no later than “3 years from the time the return was filed or 2 years from the time the tax was paid.” 26 U.S.C. § 6511(a). Since plaintiff’s federal income tax return for 2008 claiming an overpayment for that year constitutes a claim for refund, the claim itself was timely. Congress, however, has imposed a “look-back” restriction that limits the amount that a taxpayer can recover. In the case of a claim filed within three years of a return (applicable here because plaintiff’s return and claim are one in the same), a taxpayer can recover tax paid within the period “immediately preceding the filing of the claim, which is equal to three years plus the period of any extension for the filing of the return.” 26 U.S.C. § 6511(b)(2). As the Supreme Court held in Baral v. United States, 528 U.S. 431, 433 (2000), “§ 6511 contains two separate (… continued) Tax Court noted that plaintiff was advised in the letter denying her claim for a refund that suit should be brought in federal district court in the Court of Federal Claims. Case 6:16-cv-00719-GKS-KRS Document 10 Filed 07/22/16 Page 7 of 11 PageID 36 8 14196219.1 timeliness provisions: (1) § 6511(b)(1)’s filing deadline and (2) § 6511(b)(2)’s ceilings, which are defined by reference to that provision’s “look-back period [s.] “ See also, Dantzler v. U.S. I.R.S., 183 F.3d 1247, 1248-49 (11th Cir. 1999). Plaintiff filed her federal income tax return for 2008 on December 26, 2012. Three years preceding that date is December 26, 2009. Plaintiff, however, had filed an application for a six- month extension of time to file her 2008 return. That extension increases the look-back period by an additional six months, i.e., to June 26, 2009. Hence, under 26 U.S.C. Section 6511(b)(1), plaintiff could only have recovered payments made on or after that date. The Certificates of Assessments and Payments for 2008 and the Internal Revenue Code establish that the payments underlying Plaintiff’s refund claim were all made, or are deemed to have been paid, prior to June 26, 2009. The amount of $8,803 that was withheld from plaintiff’s wages is deemed to have been paid on April 15, 2009. As 26 U.S.C. § 6513(b)(1) states, “[a]ny tax actually deducted and withheld at the source during any calendar year under chapter 24 shall, in respect of the recipient of the income, be deemed to have been paid by him on the 15th day of the fourth month following the close of his taxable year with respect to which such tax is allowable as a credit under section 31.” See also, Baral, 528 U.S. at 435. The same holds true for the payment of $20,000. That amount was an overpayment of plaintiff’s federal income tax liability for 2007, which plaintiff elected to apply as an estimated payment to her federal income tax liability for 2008. Section 6513(b)(2) states that “[a]ny amount paid as estimated income tax for any taxable year shall be deemed to have been paid on the last day prescribed for filing the return under section 6012 for such taxable year (determined without regard to any extension of time for filing such return).” See also Treas. Reg. § 301.6402-3(a)(5); Hargill v. United States, 410 F. 3d 786, 792 (5th Cir. 2005). (“For the Case 6:16-cv-00719-GKS-KRS Document 10 Filed 07/22/16 Page 8 of 11 PageID 37 9 14196219.1 purposes of § 6511(b)(2)(A), Harrigill’s payment of her estimated 1995 income tax is statutorily deemed by § 6513(b) as having been made on the due date of the return without extension, i.e., on April 15, 1996.”) Finally, plaintiff’s April 13, 2009 payment of $2,200 was, of course, paid prior to June 26, 2009, regardless of whether that payment is deemed to be a payment of estimated tax. See 26 U.S.C. § 6513(b)(2). And the Recovery Rebate Credit of $600 reported on her return was deemed to have been paid on April 15, 2009. 26 U.S.C. § 6428(c) (2006 Supp. II); see also 26 U.S.C. § 6513(b)(1); 26 U.S.C. § 31 (creating a refundable credit for withholding); 26 U.S.C. § 6401(b) (stating overpayment exists to the extent that refundable credits exceed tax liability). All of these tax liabilities were paid, and credits applied, before June 26, 2009. Even if she had timely filed this action, the Court, as a matter of law, cannot award her a recovery of those payments. CONCLUSION The Court lacks subject matter jurisdiction over this action. Plaintiff filed her complaint well beyond the limitations period for doing so. Even if her complaint had been timely filed, it fails to state a claim because the payments she seeks to recover were made more than three and Case 6:16-cv-00719-GKS-KRS Document 10 Filed 07/22/16 Page 9 of 11 PageID 38 10 14196219.1 one/half years before she filed the 2008 return that serves as her claim to recover the overpaid tax she reported. The Court has no choice but to dismiss this action. Dated: July 22 2016. CAROLINE D. CIRAOLO Principal Deputy Assistant Attorney General s/ Michael N. Wilcove MICHAEL N. WILCOVE Trial Attorneys, Tax Division U.S. Department of Justice P.O. Box 14198 Ben Franklin Station Washington, DC 20044 Tel: (202) 514-6474 Fax: (202) 514-9868 michael.n.wilcove@usdoj.gov Of Counsel: A. LEE BENTLEY, III U.S. Attorney Case 6:16-cv-00719-GKS-KRS Document 10 Filed 07/22/16 Page 10 of 11 PageID 39 11 14196219.1 CERTIFICATE OF SERVICE I hereby certify that on July 22, 2016, a copy of the foregoing was served on plaintiff by U.S. mail addressed to the following: Mary N. Garretson 437 Nautilus Dr. Satellite Beach, FL 32937-3930 s/ Michael N. 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