Davis v. United States of America
Filing
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ORDER granting 5 Motion to Dismiss for Lack of Jurisdiction. Signed by Michael P. Mills on 12/15/2011. (lpm)
IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF MISSISSIPPI
DELTA DIVISION
W.E. DAVIS, AS
ADMINISTRATOR OF THE ESTATE OF
ANTHONY WALKER SMITH, DECEASED
V.
PLAINTIFF
CASE NO.: 2:11-CV-00034
UNITED STATES OF AMERICA
DEFENDANT
ORDER
This cause comes before the Court on the motion [5] of Defendant United States of
America (“Government”) to dismiss the case under Federal Rule of Civil Procedure 12(b)(1) for
lack of subject matter jurisdiction. The Court, having reviewed the submissions of the parties
and conducted a hearing on the issues, finds that the motion is well taken and should be granted.
On February 3, 2003, Plaintiff W.E. Davis filed a federal income tax return Form 706 for
the estate of Anthony Walker Smith (“Smith Estate”) and reported a federal estate tax liability of
$491,521. Included in the Smith Estate was a parcel of farm property believed to be possessed
by the decedent in fee simple. On April 17, 2003, the plaintiff paid $406,791.83 to the Internal
Revenue Service (“IRS”) representing the federal estate taxes, interest, and late penalty owed by
the Smith Estate. On November 3, 2003, the Chancery Court of Tate County, Mississippi ruled
that the decedent only held a vested remainder in the farm property rather than a fee simple
interest. The Mississippi Court of Appeals affirmed the ruling on January 20, 2005, and the
Mississippi Supreme Court denied certiorari on March 2, 2006.
On November 4, 2008, the plaintiff filed an administrative claim with the IRS for refund
of overpaid federal estate taxes. The plaintiff sought to recover the estate taxes paid on the
difference in value between the fee simple interest in the farm property reported on the tax return
and the remainder interest determined by the chancery court. On February 19, 2009, the IRS
denied the plaintiff’s claim for refund as untimely due to the claim not being filed within three
years from the date of the tax return or two years from the date of the overpayment. After the
IRS denied the plaintiff’s appeal, he filed the instant lawsuit.
The issue before this Court is whether the case should be dismissed due to the plaintiff’s
failure to file a claim for refund of tax overpayment within the time limits set by the Internal
Revenue Code.
The Government asserts that the case should be dismissed because it has not waived
sovereign immunity and therefore the Court lacks subject matter jurisdiction over the complaint.
The Government contends that because the plaintiff untimely filed the administrative claim, the
conditions of the sovereign immunity waiver found in 26 U.S.C. § 7422(a) have not been met.
The Government further contends that although the plaintiff had ample opportunity to act on the
alleged overpayment of estate tax within the statutory period, he failed to do so. The
Government maintains that equitable tolling does not apply to the statutory time limit found in
26 U.S.C. § 6511 and urges the Court to dismiss the case for lack of subject matter jurisdiction.
In response, the plaintiff argues that the Court should apply equitable tolling because the
statute of limitations expired before the refund claim and its value came into existence. The
plaintiff contends that the IRS requires taxpayers to have sufficient legal and factual grounds to
file a claim for refund and that, contrary to the Government’s argument, the Smith Estate lacked
sufficient grounds to file a claim prior to the statutory deadline. The plaintiff further contends
that if the Smith Estate is barred from asserting its right to a refund before this Court, the Estate
will be denied its due process right to challenge the overpayment.
To overcome sovereign immunity in a tax refund case, a taxpayer must file a refund
claim with the IRS within the time limits established by the Internal Revenue Code. United
States v. Dalm, 494 U.S. 596, 602 (1990). Failure to timely file a refund claim deprives the
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district court of subject matter jurisdiction. Duffie v. United States, 600 F.3d 362, 384 (5th Cir.
2010). No lawsuit for the recovery of overpaid taxes can be brought in any court “until a claim
for refund or credit has been duly filed” with the IRS. 26 U.S.C. § 7422(a) (2010). Title 26
United States Code Section 6511 provides in relevant part:
(a) Period of limitation on filing claim. --Claim for credit or refund of an
overpayment of any tax imposed by this title in respect of which tax the taxpayer is
required to file a return shall be filed by the taxpayer within 3 years from the time
the return was filed or 2 years from the time the tax was paid, whichever of such
periods expires the later, or if no return was filed by the taxpayer, within 2 years
from the time the tax was paid....
The plain language of §§ 7422(a) and 6511 require a taxpayer seeking a refund for any
unlawfully assessed tax to timely file an administrative refund claim before bringing suit against
the Government. United States v. Clintwood Elkhorn Mining Co., 553 U.S. 1, 14 (2008). The
United States Supreme Court has concluded that Congress did not intend for equitable tolling to
apply to § 6511's time limitations. United States v. Brockamp, 519 U.S. 347, 354 (1997).
Congress provides clear exceptions to the time limits in § 6511 “and those very specific
exceptions do not include ‘equitable tolling.’” Id. at 351.
This Court is sympathetic to the plaintiff’s plight. However, the law directs a finding
inconsistent with the Court’s sympathies. In the present matter, the plaintiff failed to file an
administrative claim for refund within the statutory time limits. The plaintiff contends that the
Court should apply equitable tolling because the refund claim and its value did not exist prior to
March 2, 2006, when the underlying property dispute ended. Contrary to this argument, the
plaintiff should have been aware of the refund claim as early as November 3, 2003, when the
chancery court determined that the decedent had a vested remainder interest in the farm property.
The tax return was filed on February 3, 2003. Within three years from that date, both the
chancery court and Mississippi Court of Appeals ruled on the decedent's ownership interest in
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the farm property. Had the plaintiff filed an administrative claim at that point, the claim would
have been timely and the Estate would have been afforded the opportunity to challenge the
overpayment. However, the plaintiff did not file the claim until November 4, 2008.
As to the plaintiff’s due process argument, it is well established that a “constitutional
claim can become time-barred just as any other claim can.” Block v. North Dakota ex rel. Board
of Univ. and School Lands, 461 U.S. 273, 292 (1983). The Court acknowledges that “Congress
has the authority to require administrative exhaustion before allowing a suit against the
Government, even for a constitutional violation.” United States v. Clintwood Elkhorn Mining
Co., 553 U.S. 1, 9 (2008) (citations omitted). In the case herein, the Court cannot conclude that
the Smith Estate has been denied due process to challenge the overpayment when the plaintiff
did not comply with § 6511. Likewise, the Court cannot apply equitable tolling to the instant
matter in order to cure the plaintiff's failure to timely act. The Supreme Court has explicitly
stated that equitable tolling does not apply to the time limits set forth in § 6511. Due to the
plaintiff's failure to follow the administrative prerequisites for a refund, this Court lacks subject
matter jurisdiction. The motion [5] to dismiss is GRANTED.
SO ORDERED this the 15th day of December, 2011.
/s/ MICHAEL P. MILLS
CHIEF JUDGE
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF MISSISSIPPI
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