THORPE et al v. DEPARTMENT OF TREASURY - INTERNAL REVENUE SERVICE et al
Filing
16
MEMORANDUM OPINION. Signed by Judge Kevin McNulty on 3/12/2019. (dam, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
RHANDALL THORPE and
BARBARA J. THORPE,
Civ. No. 18-4956 (KM/SCM)
Plaintiff,
MEMORANDUM OPINION
V.
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE;
PHILLIP DUN, IRS Appeals Team
Manager; DEBRA HAYNER, Appeals
Officer; and DENISE MURRAY, Team
Manager,
Defendants.
KEVIN MCNULTY, U.S.D.J.:
Plaintiffs Rhandall J. Thorpe and Barbara .J. Thorpe, pro se, have filed
this action to obtain refunds of IRA early-withdrawal penalties that they
calculated and paid in connection with their tax returns for 2002, 2004, 2005,
2007, 2008, 2010, 2012, and 2013. The defendants move, pursuant to Fed. R.
Civ. P. 12(b)(1), to dismiss the complaint for lack of subject matter jurisdiction,
because the plaintiffs did not timely file administrative claims for refunds with
the Internal Revenue Service (“IRS”). The amounts of the refunds range from
.
$235 to $25g8. For the reasons stated herein, the motion to dismiss is granted
I.
APPLICABLE STANDARD
Rule 12(b)(1) challenges to the court’s subject matter jurisdiction may be
either facial or factual attacks. See 2 Moore’s Federal Practice § 12.30[4J (3d ed.
2007); Mortensen v. First Fed. Scu.’. & Loan Assn, 549 F.2d 884, 891 (3d Cir.
1977).
The burden of establishing federal jurisdiction rests with the party
asserting its existence. [citing DaimlerChnjsler Corp. u. Cuno, 547
1
U.s. 332, 342 n. 3, 126 S. Ct. 1854 (2006).] “Challenges to subject
matter jurisdiction under Rule 12(b)(1) may be facial or factual.”
[citing Common Cause of Pa. v. Pennsylvania, 558 F.3d 249, 257
(3d Cir. 2009) (quoting Taliaferro v. Darby Twp. Zoning Bd., 458
F.3d 181, 188 (3d Cir. 2006)).] A facial attack “concerns ‘an alleged
pleading deficiency’ whereas a factual attack concerns ‘the actual
failure of [a plaintiff 5) claims to comport [factually) with the
jurisdictional prerequisites.’” [citing CNA v. United States, 535
F.3d 132, 139 (3d Cir. 2008) (alterations in original) (quoting
United States ex reL Atkinson v. Pa. Shipbuilding Co., 473 F.3d 506,
514 (3d Cir.2007)).]
“In reviewing a facial attack, the court must only consider
the allegations of the complaint and documents referenced therein
and attached thereto, in the light most favorable to the plaintiff.”
[citing Gould Elecs. Inc. v. United States, 220 F.3d 169, 176 (3d Cir.
must
20001.1 By contrast, in reviewing a factual attack, “the court
support of
permit the plaintiff to respond with rebuttal evidence in
jurisdiction, and the court then decides the jurisdictional issue by
weighing the evidence. If there is a dispute of a material fact, the
court must conduct a plenary hearing on the contested issues
prior to determining jurisdiction.” (citing McCann i.i. Newman
Irrevocable Trust, 458 F.3d 281, 290 (3d Cir. 2006) (citations
omitted).]
(footnotes
Lincoln Ben. Life Co. v. AEILife, LLC, 800 F.3d 99, 105 (3d Cir. 2015)
omitted; footnoted case citations [bracketedi in text).
H.
DISCUSSION
sued only
It is axiomatic that the United States and its agencies may be
See United
to the extent that they consent to waive their sovereign immunity.
S. Ct. 1285,
States v. Mitchell, 463 U.S. 206, 212 (1983); Lewis v. Clarke, 137
is
129 1—92 (2017). With respect to a suit for a tax refund, “that waiver
‘duly file[]’
conditional: the taxpayer must pay the dispute tax or penalty, and
United States,
an administrative claim with the IRS prior to filing suit.” Cash v.
See also
725 F. App5c 171, 173 (3d Cir. 2018) (quoting 26 U.S.C § 7422(a)).
Cir. 1983)
Mallette Bros. Constr. Co. v. United States, 695 F.2d 145, 155 (5th
2
(“In suits for tax refunds, the United States has consented to be sued, but only
when the taxpayer follows the conditions set forth in I.R.C. § 7422(a).”))
To be “duly filed,” an administrative claim must be timely. Philadelphia
Marine Trade Ass’n etc. a Commissioner, 523 F.3d 140, 146 (3d Cir. 2008).
Under 26 U. S.C.
§ 6511, an administrative claim for a refund is timely if the
taxpayer files it within three years after filing the relevant tax return, or within
two years after paying the contested liability, whichever is later.2
Read together, the import of [sections 7422 and 65111 is clear:
unless a claim for refund of a tax has been filed within the time
limits imposed by § 65 11(a), a suit for refund, regardless of
whether the tax is alleged to have been ‘erroneously,’ ‘illegally,’ or
‘wrongfully collected,’ may not be maintained in any court.
United States u. DaIm, 494 U.S. 596, 602 (1990) (citations omitted). The prior
timely filing of an administrative refund claim is therefore of jurisdictional
stature; it is a prerequisite to a federal court’s assertion of subject matter
jurisdiction. See Irvine v. United States, 729 F.3d 455, 464 (5th Cir. 2013)
Section 7422(a) reads as follows;
(a) No suit prior to filing claim for refund
No suit or proceeding shall be maintained in any court for the recovery of
any internal revenue tax alleged to have been erroneously or illegally
assessed or collected, or of any penalty claimed to have been collected
without authority, or of any sum alleged to have been excessive or in any
manner wrongfully collected, until a claim for refund or credit has been
duly filed with the Secretary, according to the provisions of law in that
regard, and the regulations of the Secretary established in pursuance
thereof.
I
28 U.S.C.
2
§ 7422(a).
(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.
Claim for credit or refund of an overpayment of any tax imposed by this title
which is required to be paid by means of a stamp shall be filed by the taxpayer
within 3 years from the time the tax was paid.
26 U.S.C.
§ 6511(a)
3
(“Failure to timely file a refund claim deprives the court of subject matter
jurisdiction for lack of a valid waiver of sovereign immunity.”).3
Mr. and Mrs. Thorpe filed tax returns for the years 2002, 2004, 2005,
2007, 2008, 2010, 2012, and 2013. The returns, prepared with the aid of
professionals, were duly sworn and subscribed. In those tax returns, they
calculated, assessed against themselves, and paid (or had deducted from their
tax refund) early withdrawal penalties for their IRA account.
The Thorpes, much later, determined that they had not in fact owed the
early withdrawal penalty, and had therefore overpaid for the relevant years.
(Cplt. Section III) They filed administrative claims for refunds with the IRS. All
the claims, however, were denied as untimely. (Denial letters, DE 2) Here, in
chart form, are the relevant dates.
j
1
Date refund claim
actually filed
Last possible date
to file refund claim
4/15/2003
Last
Payment
made4
N/A
4/15/2006
12/15/2015
2004
4/15/2005
N/A
4/15/2008
12/15/2015
2005
4/15/2006
4/24/2006
4/15/2009
12/15/2015
2007
4/15/2008
7/27/2009
7/27/2011
12/15/2015
2008
4/15/2009
5/10/2010
5/10/2012
12/15/2015
2010
4/15/2011
6/9/2011
4/15/2014
12/15/2015
2012
4/15/2013
4/21/2013
4/15/2016
6/21/2016
2013
4/15/2014
12/5/2014
4/15/2017
5/30/2017
Tax
year
Return
filed
2002
True, the district courts have jurisdiction over “[ajny civil action against the
United States for the recovery of any internal-revenue tax alleged to have been
erroneously or illegally assess or collected, or any penalty claimed to have been
collected without authority or any sum alleged to have been excessive or in any
fll).
manner wrongfully collected under the internal-revenue laws.” 28 U.S.C. § 1346(a
mity with other
But “[d]espite its spacious terms, § 1345(a)(1) must be read in confor
statutory provisions which qualify a taxpayer’s right to bring a refund suit upon
compliance with certain conditions. The first is § 7422(a), which, tracking the
United
language of 1346(afll), limits a taxpayer’s right to bring a refund suit.
States v. DaIm, 494 U.S. 596, 602 (1990).
4
For some years, the payments were made in instalments.
3
.
4
.
.“
As is apparent, each claim was filed well after the relevant deadline under 26
U.S.C. § 6511(a). For 2002, the claim missed the deadline by some nine years;
for 2012 and 2013, they missed the deadline by only about six weeks or two
months. Miss the deadline they did, however; all were filed untimely. As a
result, this court lacks subject matter jurisdiction.
In response, the Thorpes argue that the deadline for filing administrative
claims was tolled, citing two theories. Neither suffices to save their complaint.
First, the plaintiffs argue that the period should be tolled because it was
not until December 2015 that they realized they had overpaid the IRA
withdrawal penalties. The background for any tolling argument is United States
v. Brockamp, 519 U.S. 347 (1997). There, the U.S. Supreme Court held that
It
“Section 6511 sets forth its time limitations in unusually emphatic form
.
.
.
sets forth its limitations in a highly detailed technical manner, that,
linguistically speaking, cannot easily be read as containing implicit exceptions.”
Id. at 350. Thus, the Court held, “Congress did not intend the ‘equitable tolling’
3545
doctrine to apply to § 6511’s time limitations.” Id. at
Tolling is “fundamentally a question of statutory intent.” Lozano v.
Montoya Alvarez, 572 U.S. 1, 10, 134 S. Ct. 1224, 1232 (2014). Congress has
made its intent clear by amending section 6511 to incorporate only a very
g of
limited form of tolling, essentially for financial hardship based on a showin
medical disability.6 See Redondo v. United States, 542 F. AppSc 908, 911 (Fed.
This case would appear to be a poor candidate for equitable tolling, even if that
doctrine applied. The plaintiffs were aware of the essential facts; they self-assessed
these penalties in signed, sworn tax returns. Mistake, or failure to appreciate the legal
significance of those known facts, is not an extraordinary circumstance that should
operate to keep the limitations period open.
6
(Ii) Running of periods of limitation suspended while taxpayer Is unable to
manage financial affairs due to disability
(1) In general
In the case of an individual, the running of the periods specified in subsections
(a), (b), and (c) shall be suspended during any period of such individual’s life
that such individual is financially disabled.
(2) Financially disabled
5
Cir. 2013) (“We lack any discretion to suspend the statute of limitations for a
reason other than financial disability”); Teffeau v. Commissioner, Civ. No. 20 10123, 2012 WL 4215889 at *4 (D.V.J. Sept. 20, 2012) “[N]o other exception to the
Brockamp rule has been enacted.”).
Under Section 6511(h)(2)(A) (quoted in full at n. 5, supra), the time to file
unable
a refund claim shall be suspended for a period in which a taxpayer “is
al
to manage his financial affairs by reason of a medically determinable physic
in
or mental impairment of the individual which can be expected to result
of
death or which has lasted or can be expected to last for a continuous period
[be)
not less than 12 months.” Such a disability requires that “proof.
Id.
furnished in such form and manner as the Secretary may require.”
.
.
The Secretary requires that the applicant seeking tolling submit the
following:
the
(1) a written statement by a physician (as defined in § 1861(r)(1) of
Social Security Act, 42 U.S.C. § 1395x(r)), qualified to make the
determination, that sets forth:
or mental
(a) the name and a description of the taxpayer’s physical
impairment;
mental
(b) the physician’s medical opinion that the physical or
er’s
impairment prevented the taxpayer from managing the taxpay
financial affairs;
(A) In general
d if such
For purposes of paragraph (1), an individual is financially disable
medically
individual is unable to manage his financial affairs by reason of a
can be
determinable physical or mental impairment of the individual which
or can be expected to last for a
expected to result in death or which has lasted
not be
continuous period of not less than 12 months. An individual shall
proof of the existence thereof is
considered to have such an impairment unless
.
furnished in such form and manner as the Secretary may require
(B) Exception where individual has guardian, etc.
any period that
An individual shall not be treated as financially disabled during
on behalf of
such individual’s spouse or any other person is authorized to act
such individual in financial matters.
6
(c) the physician’s medical opinion that the physical or mental
impairment was or can be expected to result in death, or that it
has lasted (or can be expected to last) for a continuous period of
not less than 12 months;
(d) to the best of the physician’s knowledge, the specific time period
during which the taxpayer was prevented by such physical or
mental impairment from managing the taxpayer’s financial affairs;
and
(e) the following certification, signed by the physician:
I hereby certify that, to the best of my knowledge and belief, the
above representations are true, correct, and complete.
(2) A written statement by the person signing the claim for credit or
refund that no person, including the taxpayer’s spouse, was authorized
to act on behalf of the taxpayer in financial matters during the period
described in paragraph (1)(d) of this section. Alternatively, if a person
was authorized to act on behalf of the taxpayer in financial matters
ing
during any part of the period described in paragraph (1)(d), the beginn
and ending dates of the period of time the person was so authorized.
Rev. Proc. 99-2 1, 1999-i C.B. 960 (1999).
they
The plaintiffs have never complied with these requirements. First,
is no
claim disability only as to Ms. Thorpe; for all that appears here, there
affairs, and
impairment that prevented Mr. Thorpe from managing the couple’s
no showing was made to the IRS that he could not. See 26 U.S.C. §
is
651 1(h)(2j(B) (no tolling where “individual’s spouse or any other person
supply
authorized to act” for the person in financial matters).7 Second, they
on (DE
three letters from a physician, Dr. Martin Mayer, regarding her conditi
that Ms.
1-2, 1-3) These relate certain ailments, but they do not state anywhere
Thorpe was or is unable to manage her financial affairs, and they do not
is no
include the certification required by Rev. Proc. 99-2 1. Third, there
refund
indication that the required showing was made in connection with the
issioner, 693
claims themselves, as opposed to here in court. See Chan v. Comm
7
With one exception, the returns were filed using married filing jointly status.
7
F. App’x 752, 756 (10th Cir. 2017) (“The district court cannot make a
determination of financial disability if [the taxpayer] did not first provide the
requisite proof to the IRS.”), Fourth, I observe that this claim of medical
disability is an anomalous one. The plaintiffs do not claim they were unable to
deal with their financial affairs and file their returns; indeed, they did file their
returns, using a paid preparer. Their claim, then, is not one of inability to cope
with the demands of financial recordkeeping or filing, but merely that their
returns contained a mistake.8
Where a taxpayer has failed to make the necessary showing in the form
required by the IRS, the courts have denied the application of § 6511(h) tolling
and held the refund applications to have been untimely.9 And where the
underlying administrative refund application was not timely filed, the court
lacks subject matter jurisdiction.
CONCLUSION
For the reasons stated above, the motion of the United States to dismiss
Civ. P.
the complaint for lack of subject matter jurisdiction, pursuant to Fed. R.
t
12(b)(1), is granted. Because it is jurisdictional, this dismissal is withou
prejudice to the merits. An appropriate order is filed with this Opinion.
Dated: March 12, 2019
Kevin McNulty
United States District Judge
a
Plaintiffs argue in addition that Ms. Thorpe’s condition meets the definition of
disability for 26 U.S.C. § 72(m)(7J. That is a separate definition that bears on the
applicability, or not, of an early-withdrawal penalty, but does not govern the
applicability of the tolling exception in 26 U.S.C. § 6511.
9
See Abston u. Comm’r of IRS, 691 F.3d 992, 995 (8th Cir. 2012) (“[Nlumerous
e
district courts have dismissed taxpayer refund suits as time-barred by § 6511 becaus
ian’s
the taxpayer’s claim of financial disability was not supported by a physic
statement complying with Revenue Procedure 99-2 1.”) (collecting cases, including
*5 (D.N.J. Aug. 10, 2011)); Estate
Pleconis v. IRS, No. 09—5970, 2011 WL3502057, at
ress chose
of Kirsch u. United States, 265 F. Supp. 3d 315, 321 (W.D.N.Y. 2017) (“Cong
Rev. Proc. 99to define ‘financially disabled’ very narrowly, and failure to comply with
2lis fatal to a claim that a taxpayer was financially disabled.”)
S
8
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