Intermountain Electronics v. USA
MEMORANDUM DECISION - granting in part and denying in part 26 Motion to Dismiss for Lack of Jurisdiction: The Governments Motion to Dismiss Intermountains Complaint for lack of subject-matter jurisdiction is DENIED. The Governme nts Motion to Dismiss Intermountains Complaint for failure to state a claim for relief is GRANTED. The Complaint is DISMISSED WITHOUT PREJUDICE. Intermountain may file an amended complaint on or before August 2, 2021. Signed by Judge Jill N. Parrish on 7/16/21. (alf)
2021 JUL 16 AM 11:21
U.S. DISTRICT COURT
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
INTERMOUNTAIN ELECTRONICS, INC.,
UNITED STATES OF AMERICA,
ORDER DENYING MOTION TO
DISMISS FOR LACK OF SUBJECTMATTER JURSIDICTION AND
GRANTING MOTION TO DISMISS FOR
FAILURE TO STATE A CLAIM
Case No. 2:20-cv-00501-JNP
District Judge Jill N. Parrish
Before the court is a Motion to Dismiss (ECF No. 26) filed by the United States of America
(the “Government” or “Defendant”). Intermountain Electronics, Inc. (“Intermountain” or
“Plaintiff”) instigated this suit after the IRS disallowed its claim for a tax refund. The Government
moves to dismiss Intermountain’s action under Rules 12(b)(1) and 12(b)(6) of the Federal Rules
of Civil Procedure. For the reasons set forth herein, the court DENIES the Government’s Rule
12(b)(1) Motion and GRANTS its Rule 12(b)(6) Motion.
Intermountain is a Utah corporation that “designs, engineers, manufactures, and services
custom electrical distribution and control equipment for underground and surface mining” and
various other applications. ECF No. 2 ¶ 7. In 2013, Intermountain hired AlliantGroup, LP
(“AlliantGroup”), a firm that assists businesses to claim state and federal tax credits, including the
federal credit for increasing qualified research expenditures (“R&D Credit”) provided for under
26 U.S.C. § 41. 1
In 2014, after receiving a report from AlliantGroup that alleged to have evaluated
Intermountain’s eligibility for the R&D Credit in prior years, Intermountain filed amended tax
returns for tax years 2010 and 2011, along with a Form 6765 2 for each year. In the amended returns,
Intermountain claimed R&D credits in the amount of $786,503 3 for 2010 and $966,839 for 2011,
As a result of the amended returns, the IRS initiated an examination to determine
Intermountain’s eligibility for the credits. Over the course of an approximately five-year
examination, the IRS requested and received substantial amounts of information from
Intermountain. The IRS ultimately disallowed Intermountain’s claim for credits for both years,
concluding both that much of the work performed by Intermountain employees did not constitute
qualified research and that Intermountain failed to adequately substantiate its claims through the
evidence it provided to the IRS. See ECF Nos. 26-3, 26-4, 26-6.
On July 14, 2020, Intermountain brought the present suit, asserting a single cause of action:
Recovery of Illegally Collected Tax. It alleges that the IRS erred in disallowing its claims for credit
and seeks a tax refund in the amount of $1,753,342. The Government now moves to dismiss under
Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, arguing that this court lacks
This tax credit is described in greater detail below.
This is the form prescribed by the IRS for taxpayers seeking the R&D credit.
This amount resulted in alleged carrybacks to tax years 2005, 2006, and 2008.
subject-matter jurisdiction over the suit and that Intermountain has failed to state a claim upon
which relief may be granted.
Subject-Matter Jurisdiction (Rule 12(b)(1))
Federal Rule of Civil Procedure 12(b)(1) provides for dismissal of an action from federal
court for lack of subject-matter jurisdiction. FED R. CIV. P. 12(b)(1). When a party moves to dismiss
an action under Rule 12(b)(1), it “mount[s] either a facial or a factual attack. A facial attack
assumes the allegations in the complaint are true and argues they fail to establish jurisdiction.”
Baker v. USD 229 Blue Valley, 979 F.3d 866, 872 (10th Cir. 2020) (citations omitted). “A factual
attack goes beyond the allegations in the complaint and adduces evidence to contest jurisdiction.”
Id. The court may consider relevant evidence in adjudicating a factual attack on subject-matter
Failure to State a Claim (Rule 12(b)(6))
Dismissal of a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure is
appropriate when a plaintiff fails to state a claim upon which relief can be granted. When
considering a motion to dismiss for failure to state a claim, a court “accept[s] as true all wellpleaded factual allegations in the complaint and view[s] them in the light most favorable to the
plaintiff.” Burnett v. Mortg. Elec. Registration Sys., Inc., 706 F.3d 1231, 1235 (10th Cir. 2013).
“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (citation omitted). The complaint must allege more than labels or legal conclusions and its
factual allegations “must be enough to raise a right to relief above the speculative level.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007).
As explained in greater detail below, the Government moves to dismiss this case for lack
of subject-matter jurisdiction because, it argues, it did not waive its sovereign immunity. It argues
that Intermountain failed to properly file its claim for refund with the IRS and that this deprives
this court of jurisdiction. Intermountain contends that it met the requirements for a properly filed
claim and that even if it did not, the IRS waived the claim requirements and thereby waived its
sovereign immunity. The court first outlines the Research and Development credit Intermountain
seeks, along with the statutory and regulatory requirements for filing a proper claim for credit, then
addresses the contentions of the parties.
R&D Tax Credit
26 U.S.C. § 41 allows taxpayers to claim a tax credit for qualified research expenses that
exceed the amount they spent during an earlier comparison period. This credit (the “R&D credit”)
is equal to twenty percent of the difference between a taxpayer’s qualified research expenses from
the year in which the credit is claimed and the “base amount”—the qualified research expenses
from the comparison period. 26 U.S.C. § 41(a). Qualified research expenses include wages paid to
employees who perform or supervise qualified research. Id. § 41(b). Qualified research includes
research and development in the experimental or laboratory sense, research that is undertaken to
discover information that is technological in nature and that is intended to be used in the
development of a new or improved business component of the taxpayer, and activities that
constitute elements of a process of experimentation for a specified purpose. Id. § 41(d); Treas.
Reg. § 1.174-2(a)(1).
“Absent a waiver, sovereign immunity shields the Federal Government and its agencies
from suit.” Dep’t of Army v. Blue Fox, Inc., 525 U.S. 255, 260 (1999) (citation omitted). A waiver
of sovereign immunity “must [ ] be ‘unequivocally expressed’ in the statutory text” and it must be
“strictly construed . . . in favor of the sovereign.” Id. at 261 (citations omitted).
Congress, by statute, has waived the Federal Government’s sovereign immunity from tax
refund suits only when certain conditions are met. Specifically, no suit for a refund may be brought
in federal court unless a claim for a refund has first been filed with the Secretary of the Treasury
in accordance with Treasury Regulations:
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.
26 U.S.C. § 7422(a). The Treasury Department has promulgated regulations under this statute
that require a taxpayer to outline with specificity the factual bases upon which her claim for
refund is based:
No refund or credit will be allowed after the expiration of the
statutory period of limitation applicable to the filing of a claim
therefor except upon one or more of the grounds set forth in a claim
filed before the expiration of such period. The claim must set forth
in detail each ground upon which a credit or refund is claimed and
facts sufficient to apprise the Commissioner of the exact basis
thereof. The statement of the grounds and facts must be verified by
a written declaration that it is made under the penalties of perjury. A
claim which does not comply with this paragraph will not be
considered for any purpose as a claim for refund or credit.
Treas. Reg. § 301.6402(b)(1) (emphasis added).
In short, the Government’s waiver of immunity for refund cases, such as the one before the
court, is conditional upon a taxpayer’s duly filing a claim for refund with the Treasury Department.
To be duly filed, a “claim must set forth in detail each ground upon which a credit or refund is
claimed and facts sufficient to apprise the Commissioner of the exact basis thereof.” Id. When a
taxpayer complies with these regulatory requirements, she gives formal notice to the IRS that she
is making a claim for a refund. If a taxpayer fails to meet this regulatory requirement—i.e., if she
fails to give formal notice—then federal courts normally lack jurisdiction to hear her claim. See
Green v. United States, 880 F.3d 519, 532 (10th Cir. 2018); Quarty v. United States, 170 F.3d 961,
972 (9th Cir. 1999) (“Compliance with these specificity requirements is a prerequisite to subject
matter jurisdiction over a claim for a refund.”). 4
While failure to provide formal notice normally deprives federal courts of jurisdiction over
a taxpayer’s refund claim, there are two further avenues through which a taxpayer may have her
claim heard in federal court: (1) she may give informal notice of her claim for refund to the IRS
or (2) the IRS may waive the specificity requirements of formal notice by investigating and
adjudicating the claim on the merits.
Informal notice is a judicially-created doctrine that allows a taxpayer to make a claim for
refund even if she has not met the specificity requirements of formal notice. See Linton v. Comm’r
of Internal Revenue, 764 F. App’x 674, 680–81 (10th Cir. 2019) (“[T]he Supreme Court has held
that ‘a notice fairly advising the Commissioner of the nature of the taxpayer’s claim, which the
Closely related to this doctrine is the “substantial variance” doctrine. The substantial variance
doctrine “bars a taxpayer from presenting claims in a tax refund suit that ‘substantially vary’ the
legal theories and factual bases set forth in the tax refund claim presented to the IRS.” Green, 880
F.3d at 532. Courts may not consider facts that a taxpayer failed to present to the IRS in connection
with her claim for refund.
Commissioner could reject because too general or because it does not comply with formal
requirements of the statute and regulations, will nevertheless be treated as a claim where formal
defects and lack of specificity have been remedied by’ the taxpayer’s later amendment of the
claim.” (quoting United States v. Kales, 314 U.S. 186, 194 (1941))). While courts have articulated
the components of an informal claim differently, courts generally agree that an informal claim must
(1) be made in writing; (2) place the IRS on actual or constructive notice that the taxpayer seeks a
refund for a specific year; and (3) describe the legal and factual basis for the refund. See, e.g., id.;
Mobil Corp. v. United States, 67 Fed. Cl. 708, 716 (2005); PALA, Inc. Emps. Profit Sharing
Plan & Tr. Agreement v. United States, 234 F.3d 873, 877 (5th Cir. 2000).
Finally, the IRS waives the specificity requirements of formal notice when it investigates
and adjudicates a refund claim on its merits. See Angelus Milling Co. v. Comm’r of Internal
Revenue, 325 U.S. 293, 297 (1945) (“If the Commissioner chooses not to stand on his own formal
or detailed requirements, it would be making an empty abstraction, and not a practical safeguard,
of a regulation to allow the Commissioner to invoke technical objections after he has investigated
the merits of a claim and taken action upon it.”); Quarty v. United States, 170 F.3d 961, 973 (9th
Cir. 1999) (“The government may waive compliance with the specificity requirements of Treasury
Regulation § 301.6402–2(b)(1) if it has investigated the merits of a claim and taken action upon
it.” (citations omitted)). To establish that the government has waived compliance with the
regulations’ specificity requirement, “[t]he showing should be unmistakable that the
Commissioner has in fact seen fit to dispense with his formal requirements and to examine the
merits of the claim.” Angelus Milling, 325 U.S. at 297.
In short, for Intermountain to have its suit heard in federal court, it must have either
satisfied the requirements for formal notice, satisfied the requirements for informal notice, or it
must show that the Government waived its notice requirements. The Government argues that
Intermountain has done none of the above; Intermountain contends that it has done all three. The
court first touches on the issue of formal notice, as this topic represents the majority of the
Government’s argument in its Motion to Dismiss, but ultimately concludes that the IRS waived
the specificity requirements.
The Government argues that Intermountain falls short of the formal notice requirements
because it failed to provide the IRS with the information necessary to apprise it of the factual bases
underlying its claims. Specifically, the Government asserts that (1) Intermountain did not specify,
upon request from the IRS, what process of experimentation was performed on what business
component; (2) Intermountain did not specify which employees performed such processes or how
much of their time they spent on such processes; and (3) Intermountain did not submit evidence
from which the base amount—the amount necessary to calculate the increase in qualified expenses
for the tax years in question—could be calculated. Instead, Intermountain explained that it did not
employ a contemporaneous time-tracking system during the relevant tax years and that it simply
estimated, after the fact, how much time employees spent on qualifying activities, without
explaining what those qualifying activities were. See ECF No. 26-7 at 15–16. The Government
argues that by failing to provide this information, Intermountain did not “set forth in detail each
ground upon which a credit or refund is claimed and facts sufficient to apprise the Commissioner
of the exact basis thereof.” Treas. Reg. § 301.6402(b)(1).
Intermountain contends that it complied with the formal notice requirements by filing the
prescribed forms for 2010 and 2011—its Amended Returns (Form 1120X) along with the other
necessary forms, including Form 6765, which provides computations for the R&D tax credit. The
Government argues that these forms are necessary but not sufficient to properly file a claim for
There is some tension, it appears, between the various forms of guidance promulgated by
the IRS. On the one hand, Treasury Regulations, as explained above, require that a taxpayer
claiming a refund “set forth in detail each ground upon which a credit or refund is claimed and
facts sufficient to apprise the Commissioner of the exact basis thereof.” Treas. Reg.
§ 301.6402(b)(1). On the other hand, the IRS promulgates a form, Form 6765, and instructs tax
payers to use this form to “figure and claim the credit for increasing research activities (research
credit) . . . .” See IRS Form 6765, available at www.irs.gov/Form6765 (emphasis added). Form
6765 contains no instruction to provide additional facts underlying the calculations, nor does it
contain any space where a taxpayer might do so. Id. Furthermore, Treasury regulation on this
“A properly executed individual, fiduciary, or corporation original
income tax return or an amended return (on 1040X or 1120X if
applicable) shall constitute a claim for refund or credit within the
meaning of section 6402 and section 6511 for the amount of the
overpayment disclosed by such return (or amended return).”
Treas. Reg. § 301.6402-3(a)(5) (emphasis added). See also Fearis v. Comm’r of Internal Revenue,
548 F. Supp. 408, 410 (N.D. Tex. 1982) (“In the normal course of events [the filing of the tax return
itself] will generally meet the specifications of [Section] 301.6402-2(b)(1).”).
In short, the Treasury indicates in one place that taxpayers must set forth in detail the factual
grounds for their claimed refund in order to properly file a claim for a refund, and in other places
indicates that filing a return, or amended return, along with Form 6765, suffices as a claim for
refund. 5 The Government argues that these forms are necessary but not sufficient to duly file a
claim for refund, asserting that “it is possible that a refund claim both be filed on the correct form
and that the refund claim ‘set forth in detail each ground upon which a credit or refund is
claimed . . . .’” ECF No. 28 at 6 (quoting 26 Treas. Reg. § 301.6402(b)(1)). Apparently, the
Government is suggesting that in order to duly file a claim for this sort of refund, the taxpayer
either needs to sua sponte submit along with Form 6765, through some unspecified means, all
supporting factual evidence to support its claim for refund, or it must endure the IRS’s complete
investigative process, through which it submits requested evidence, before the claim can be
considered duly filed. The Government’s approach would appear to place quite a heavy burden on
taxpayers, especially in light of the confusing guidance described above. Ultimately, the court need
not decide the issue of formal notice because, as explained below, it concludes that that the
Government waived the specificity requirements of Section 301.6402(b)(1). 6
As explained above, the Supreme Court has held that the IRS waives the regulatory
specificity requirements when it investigates the merits of a claim and takes action on it. Angelus
Milling, 325 U.S. at 297. Intermountain contends that by investigating Intermountain’s claims over
In other words, the Treasury instructs that filing these forms alone satisfies the requirements of
The Government cites on several occasions the Tenth Circuit’s decision in Green for the
proposition that this court lacks subject-matter jurisdiction over Intermountain’s claim because
Intermountain failed to provide the information described above. But in Green, the court applied
the substantial variance rule to bar the plaintiff in that case from raising a legal theory at the
summary judgment stage that it had not raised in its refund claim with the IRS. Green, 880 F.3d at
532. Thus, while Green does stand for the general proposition that courts may not consider matters
not raised in the claim for refund with the IRS, it has little bearing on the issue before the court in
a five-year period and authoring memoranda denying the claims, the IRS waived the formal notice
requirement. The Government responds that it did not waive the requirements because it did not
deny Intermountain’s claims on their merits; rather, it argues that it denied the claims based on the
lack of information submitted by Intermountain. It quotes the “Appeals Case Memorandum” (ECF
No. 26-6) denying Intermountain’s 2010 claims, in which the IRS stated that “documentation to
substantiate that the employees were performing research activities is extremely lacking” and that
there was “no indication of how [employees’] time is allocated between performing research
activities and other work.” ECF No. 26-6 at 16 (Document p. 15). It also cites the Form 886-A
“Explanation of Items” (“Explanation”) prepared by IRS Mining Engineer William Greer
(“Greer”) (ECF Nos. 26-3 & 26-4)—a document that explains the disallowance of Intermountain’s
2011 claims—which states that “[t]he nexus between the estimated hours performing research and
any qualified research has not been provided to prove the claimed qualified research” and that
Intermountain “failed to show the relation between hours worked and the related qualifying R&E
costs in the experimental or laboratory sense.” ECF No. 26-2 at 17 (Document p. 16).
The court agrees with Intermountain. The Supreme Court has explained that for the IRS to
waive the formal notice requirements, “[t]he showing should be unmistakable that the
Commissioner has in fact seen fit to dispense with his formal requirements and to examine the
merits of the claim.” Angelus, 325 U.S. at 297. Circuit courts hold this requirement to bet met
where the IRS investigates a refund claim and denies it on the merits. For example, in Harper v.
United States, 847 F. App’x. 408 (9th Cir. 2021), the Ninth Circuit confronted facts nearly
indistinguishable from those at bar here. After the taxpayer submitted a claim for a refund, based
on the R&D credit, the IRS conducted a four-year investigation in which it “targeted its questioning
and document requests specifically on determining Taxpayer’s eligibility for the increased research
credit” and ultimately decided that the taxpayer “[had] not shown [it was] entitled to the claimed
refund.” Id. at 410. The Harper court held that the IRS’s actions constituted waiver of the
specificity requirements, noting that the IRS “accept[ed] Taxpayer’s properly filed Forms 6765
and substantively examin[ed] Taxpayer’s specific claims.” Id. See also, e.g., Goulding v. United
States, 929 F.2d 329, 332–333 (7th Cir. 1991); United States v. Henderson Clay Prods., 324 F.2d
7, 17–18 (5th Cir. 1963); cf. Computervision Corp. v. U.S., 445 F.3d 1355, 1367–68 (Fed. Cir.
2006) (recognizing waiver rule but holding that taxpayer could not avail itself of rule where IRS
considered claim after the running of the limitations period).
As in Harper, here, the IRS conducted a lengthy investigation into Intermountain’s refund
claim, during which it made numerous requests for further information intended to determine
Intermountain’s eligibility for the R&D credit. The investigation lasted over five years; during this
time, Intermountain responded to nine IRS requests for information. As explained above, the
Government argues that the IRS did not examine the merits of the claim or reject the claim on its
merits; rather, it contends that the IRS rejected the claim because it lacked the necessary
information to determine whether the requirements for the R&D credit were met. But while the
IRS ultimately may not have been satisfied with the information provided by Intermountain, it is
clear not only that it understood the factual basis for Intermountain’s claim, its disallowance was
based on the merits of the claim.
This much is evidenced by the documents in which the IRS explains its disallowance of
the claimed credits, both the Explanation and the Appeals Case Memorandum. The Explanation
contains a ten-page section that outlines Intermountain’s position regarding why it deserved the
R&D credit. See ECF No. 26-3 at 4–14 (Document pp. 3–13). This section of the Explanation
evinces that the IRS understood the factual grounds underlying Intermountain’s claim. And in the
subsequent section of the Explanation, Greer provides several merit-based justifications for
ultimately denying the claim, including the following:
“The substantiation that was provided [by Intermountain] is the use of skills and
knowledge acquired as a professional to determine the likely best choice among
several available or the optimal design. That is not experimentation.” ECF No. 263 at 16–17.
“The documentation that has been provided by IE does not support their claim that
research and development costs in the experimental or laboratory sense has been
performed on the ten projects [sic].” Id. at 17.
“In my opinion, the entire package of construction and equipment of the type built
and claimed by IE would not qualify for the R&E credit.” Id. at 21.
“These costs [incurred by Intermountain] (i.e., designs, installation, upgrades, and
maintenance costs) are attributable to the improvement of property or are an
element of construction . . . . Thus, such costs are disallowed under Treas. Reg. §
1.174-2(b)(1) and § 1.174-2(b)(4).” ECF No. 26-4 at 1.
“While IE claims that the business components were the unique and non-repeatable
finished design for each of the projects under contracts, Examination determined
that IE’s business components were the projects themselves, which are finished
products and not research.” Id. at 5.
“Based on the information received from the audit . . . , there may have been some
qualified research in the early electrical design of the IE projects[,] but most of the
construction was . . . either a process of integrating known capabilities or appear to
be fairly routine or were small in comparison to the overall project.” Id. at 16.
While Greer notes on a few occasions that Intermountain failed to submit documentation
sufficient to substantiate some of its claims, this does not mean that the IRS did not examine
Intermountain’s claim on the merits. To the contrary, the quoted language above demonstrates that
the IRS knew the factual basis for Intermountain’s claimed credits and disallowed them based on
the facts uncovered during its investigation.
The “Appeals Case Memorandum” prepared by the IRS further supports this conclusion.
The Appeals Officer assigned to review Intermountain’s claims for 2010, Debbie McFaul, like
Greer, reached conclusions based on the merits of Intermountain’s claims. See, e.g., ECF No. 266 at 12 (Document p. 11) (“While Taxpayer and AG contend there were costs to eliminate design
uncertainties in each of the 10 projects analyzed for 2010, these projects do not meet the test. The
costs to build these components were not research and development costs in the experimental or
laboratory sense.”). The Appeals Case Memorandum also notes that the IRS offered to pay
Intermountain 25% of the amount it sought for tax year 2010. Id. at 2 (Document p. 1).
In short, Section 301.6402(b)(1) declares that “[a] claim which does not comply with this
paragraph will not be considered for any purpose as a claim for refund or credit.” Here, it is clear
that the IRS did consider Intermountain’s claim for refund and thereby waived the specificity
requirements of Section 301.6402(b)(1). It indicated as much when it stated the following in a
letter after considering Intermountain’s protest:
We considered your protest and the evidence and arguments
submitted in support of the above claim for refund of [tax and/or
penalty]. We can’t allow the above claim for an adjustment to your
[tax and/or penalty] for the following reasons:
Your claim for refund under IRC section 41 for Research and
Development Credit has been denied. Your activities are not
considered research and development under the four part test of IRC
We based our decision on the provisions of the IRS laws and
regulations. This letter is your legal notice that we fully disallowed
ECF No. 2-2 at 2. 7 Based upon the foregoing, the court concludes that the IRS waived its
specificity requirements by considering and rejecting Intermountain’s claims on the merits. The
court may therefore exercise subject-matter jurisdiction over Intermountain’s claims.
Failure to State a Claim
The Government also contends that Intermountain’s Complaint fails to state a claim upon
which relief may be granted. It argues that Intermountain, in its Complaint, merely parrots the
statutory requirements for the R&D credit and asserts that it met them, without alleging particular
supporting facts. The Government further contends that Intermountain failed to even assert that it
met all of the requirements for the R&D credit; Intermountain failed to make any allegations
regarding the base amount or any figures that would allow the calculation of a base amount. The
Government argues that for these reasons, the Complaint falls short of the Twombly/Iqbal standard
enumerated above. Intermountain responds that it does identify in the Complaint the facts giving
rise to its claim for refund, and that the Government has notice of the base computation because it
was included on Intermountain’s Form 6765.
The court agrees with the Government. While the standard does not require “detailed
factual allegations,” it does require more than “labels and conclusions” or a “formulaic recitation
of the elements of a cause of action.” Twombly, 550 U.S. at 555. Intermountain’s Complaint is
The letter further stated that Intermountain could “file suit with the United States District Court
having jurisdiction or with the United States Court of Federal Claims” to recover “any tax,
penalties, or other moneys shown on this disallowance form.” Id. While not dispositive of the
waiver or jurisdictional issues before the court, this indicates that the IRS viewed its investigation
as complete and its disallowance as a final decision on the merits.
replete with such labels and conclusions; factual allegations are sparse. For example,
Intermountain states in the “General Allegations” section of its Complaint:
During [tax years 2010 and 2011], Intermountain Electronics, in the
carrying out of its business, engaged in qualified research activities
for the development of new and improved business components.
Intermountain Electronics’ development of new and improved
business components was intended to improve the performance,
reliability, or quality of business components, or to provide a new or
During Intermountain Electronics’ development of each business
component, substantially all of the involved activities and [sic]
constituted a process of experimentation.
ECF No. 2 at ¶¶ 8–10. It asserts that the IRS erred in disallowing its claim, but does not state in
what way the IRS erred. Id. at ¶ 22. Finally, under its sole cause of action, Intermountain simply
asserts that it is “entitled to the full amount of the claimed tax refund.” Id. at ¶ 23. 8 Intermountain’s
Complaint is a paradigm example of the sort of complaint declared unsatisfactory by the Supreme
Court in Twombly and Iqbal. Accordingly, the court GRANTS the Government’s Motion to
Dismiss for failure to state a claim.
In its Response, Intermountain requests leave to amend its Complaint if the court finds it
failed to state a claim for relief. Because the court does conclude that the Complaint failed to state
a plausible claim for relief, it now grants Intermountain’s request for leave to amend. In its
amended complaint, Intermountain must include sufficient factual matter to advise the court and
the Government of the nature of its claim. This should include the facts underlying its belief that
it is entitled to a refund, such as the activities it believes constituted qualified research activities.
Intermountain did not attach Form 6765, or any other documents besides disallowance letters
from the IRS, to the Complaint.
The amended complaint should also articulate the ways in which the IRS improperly denied
Intermountain’s claim for refund. Intermountain may file an amended complaint on or before
August 2, 2021.
CONCLUSION AND ORDER
The court HEREBY ORDERS as follows:
1. The Government’s Motion to Dismiss Intermountain’s Complaint for lack of subjectmatter jurisdiction is DENIED.
2. The Government’s Motion to Dismiss Intermountain’s Complaint for failure to state a
claim for relief is GRANTED. The Complaint is DISMISSED WITHOUT PREJUDICE.
Intermountain may file an amended complaint on or before August 2, 2021.
DATED July 16, 2021.
BY THE COURT
Jill N. Parrish
United States District Court Judge
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