Opinion
No. 03 Civ. 6670 (HBP).
March 9, 2005
OPINION AND ORDER
I. Introduction
Defendant moves to dismiss this action, which seeks the return of allegedly overpaid income taxes, for lack of subject matter jurisdiction. The parties have consented to my exercising jurisdiction for all purposes pursuant to 28 U.S.C. § 636(c). For the reasons set forth below, defendant's motion is granted.
II. Facts
This is an action to recover overpaid income taxes for 1994 and 1995. Read with the leniency to which pro se litigants, such as plaintiffs, are entitled, Haines v. Kerner, 404 U.S. 519, 520 (per curiam) (1972); Ciak v. United States, 59 F.3d 296, 306 n. 9 (2d Cir. 1995), the complaint alleges the following facts.
On or about April 15, 1995 and April 15, 1996, plaintiffs filed for automatic four-month extensions of time to file their 1994 and 1995 tax returns (Complaint, Attachments A B). Each application reflected that plaintiffs' total payments for each year exceeded their estimated tax liability for that year. As a result of these filings, the due date for plaintiff's 1994 and 1995 tax returns was extended to August 15, 1995 and August 15, 1996, respectively.
Plaintiffs claim that they filed their tax returns for 1994 and 1995 in January, 1997 (Complaint, Attachment C). Plaintiffs claimed a refund due on their 1994 tax return in the amount of $4,485 and a refund due on their 1995 return in the amount of $7,947. It is these sums that are in issue in this action.
The Internal Revenue Service ("IRS") claims that it has no record of receiving plaintiffs' 1994 and 1995 tax returns in January, 1997 (Declaration of Jeffrey Burg, dated March 9, 2004 ("Burg Decl."), ¶ 5). Accordingly, the IRS prepared tax returns for plaintiffs (Burg Decl. ¶ 6 and Exhibits A B attached thereto). Apparently on the basis of these returns, the IRS sent deficiency notices to plaintiffs in November, 2000, asserting tax deficiencies of $25,999 for 1994 and $28,530 for 1995 (Complaint, Attachment G).
The record does not disclose how the IRS could prepare tax returns for the plaintiffs. I assume that the IRS derived income and withholding figures from the copies of W-2 statements submitted to the IRS by plaintiffs' employers.
In January, 2001, plaintiff Chiulli wrote to the IRS in response to the deficiency notices and enclosed unsigned copies of plaintiffs' 1994 and 1995 tax returns (Complaint, Attachment H). Between January and August 2001, plaintiffs had a number of inconclusive telephone conversations with the IRS. In August, 2001, the IRS wrote to plaintiff stating that it had "received" plaintiffs' 1994 and 1995 "federal individual income tax return[s]," and requesting, among other things, that plaintiffs sign declarations attesting to the accuracy and completeness of the returns (Complaint, Attachment I). Plaintiffs executed the requested declarations and returned them to the IRS in late August, 2001 (Complaint, Attachment J).
In September, 2001, the IRS wrote to plaintiffs and acknowledged that it had received plaintiffs' claims on January 27, 2001 but stated that it could not refund the excess tax payments because it first received the claims more than three years after the 1994 and 1995 returns were due (Complaint, Attachment K). Plaintiffs filed an administrative appeal with the IRS, and it was finally denied in May, 2003 (Complaint, Attachment Q).
The IRS sent plaintiffs two identical letters dated September 7, 2001, denying their claims for 1994 and 1995 (Complaint, Attachment K). Plaintiffs claim that, due to the disruption resulting from the mass murders committed at the World Trade Center on September 11, 2001, these letters were not delivered until November, 2001. Although I believe plaintiffs, the date on which these latters were received is not material to the resolution of this motion.
III. Analysis
A. Applicable Standards
The standards applicable to a motion to dismiss for lack of subject matter jurisdiction are well-settled and require only brief review:
In assessing a motion to dismiss for lack of subject matter jurisdiction, a court must "accept as true all material factual allegations in the complaint," Shipping Fin. Serv. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir. 1998) (citing Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)), but refrain from "drawing from the pleadings inferences favorable to the party asserting [jurisdiction]." Id. (citing Norton v. Larney, 266 U.S. 511, 515, 45 S.Ct. 145, 69 L.Ed. 413 (1925)). Courts evaluating Rule 12(b)(1) motions "may resolve the disputed jurisdictional fact issues by reference to evidence outside the pleadings, such as affidavits." Zappia Middle East Constr. Co. v. Emirate of Abu Dhabi, 215 F.3d 247, 253 (2d Cir. 2000). Where jurisdiction is "so intertwined with the merits that its resolution depends on the resolution of the merits," the court should use the standard "applicable to a motion for summary judgment" and dismiss only where "no triable issues of fact" exist. London v. Polishook, 189 F.3d 196, 198-99 (2d Cir. 1999) (citation omitted); see also Europe and Overseas Commodity Traders, S.A. v. Bangue Paribas London, 147 F.3d 118, 121 n. 1 (2d Cir. 1998).Cromer Fin. Ltd. v. Berger, 137 F. Supp.2d 452, 267 (S.D.N.Y. 2001). See also Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000) ("In resolving a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), a district court . . . may refer to evidence outside the pleadings." (citations omitted)); Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 108 (2d Cir. 1997) (in assessing a motion to dismiss for lack of subject matter jurisdiction, Court is not limited to the allegations of the complaint); S.E.C. v. Princeton Econ. Int'l Ltd., 84 F. Supp.2d 452, 453-54 (S.D.N.Y. 2000).
The party asserting that the court has subject matter jurisdiction bears the burden of proving the court's jurisdiction. FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 231 (1990); Overton v. New York State Div. of Milit. Naval Affairs, 373 F.3d 83, 93 (2d Cir. 2004); Bd. of Educ. of Mt. Sinai Union Free Sch. Dist. v. New York State Teachers Ret. Sys., 60 F.3d 106, 109 (2d Cir. 1995).
B. Defendants' Arguments
Defendant argues that the Court lacks subject matter jurisdiction over plaintiffs' claim because plaintiffs did not timely file a claim for a refund with the IRS. Specifically, defendant argues that a timely-filed claim is a prerequisite to an action for a refund of overpaid taxes, and since plaintiffs did not file a claim within the applicable limitations periods, they have failed to comply with a condition precedent to their action. Thus, argues defendant, the court lacks subject matter jurisdiction.
Although I agree that this action must be dismissed for lack of subject matter jurisdiction, I reach this conclusion through a slightly different analysis than that suggested by the IRS.
It is well settled that the United States enjoys sovereign immunity from suits except to the extent that it has waived such immunity. See United States v. Dalm, 494 U.S. 596, 608 (1990). In addition, "`limitations and conditions upon which the [g]overnment consents to be sued must be strictly observed and exceptions thereto are not to be implied.'" Lehman v. Nakshian, 453 U.S. 156, 161 (1981), quoting Soriano v. United States, 352 U.S. 270, 276 (1957). Although Congress granted district courts broad original jurisdiction over civil actions against the United States for the recovery of "tax alleged to have been erroneously or illegally assessed or collected, 28 U.S.C. § 1346(a)(1), a taxpayer must follow certain procedures to maintain such a suit. See Dalm, 494 U.S. at 601-02." Battle v. United States Internal Revenue Serv., 98 Civ. 4697 (DC), 1999 WL 350875 at *2 (S.D.N.Y. June 1, 1999).
Technically, the proper defendant in a taxpayer's action for a refund is the United States, not the IRS. See 26 U.S.C. § 7422(f) (1), (2). I deem the defendant to be the United States.
A taxpayer cannot bring an action to recover overpaid taxes "until a claim for refund or credit has been duly filed with the Secretary [of the Treasury]." 26 U.S.C. § 7422(a). In order to be "duly filed," the claim must be timely filed. Comm'r v. Lundy, 516 U.S. 235, 239-40 (1996); Kreiger v. United States, 539 F.2d 317, 321 (3d Cir. 1976) (per curiam); Canton v. United States, 388 F.2d 985, 986 (8th Cir. 1968) (per curiam); Kirsh v. United States, 131 F. Supp.2d 389, 392 (S.D.N.Y. 2000),aff'd, 258 F.3d 131 (2d Cir. 2001); Mertens v. United States, 12 Cl. Ct. 678, 679 (1987); Oldland v. Kurtz, 528 F. Supp. 316, 322 (D. Col. 1981). An income tax return that claims that a refund is due constitutes a claim for a refund. Weisbart v. United States Dep't of Treasury, 222 F.3d 93, 96 (2d Cir. 2000), quoting Treas. Reg. § 301.6402-3 (a) (5).
The three alternative limitations periods within which a claim for a refund must be filed are set forth in 26 U.S.C. § 6511(a).
Section 6511(a) provides that a refund claim is timely if filed:
[1] within 3 years from the time the return was filed or [2] 2 years from the time the tax was paid, whichever of such periods expires the later, or [3] if no return was filed by the taxpayer, within 2 years from the time the tax was paid.Weisbart v. United States Dep't of Treasury, supra, 222 F.3d at 94.
The only possible claims plaintiffs filed here were their tax returns for 1994 and 1995. Plaintiffs claim that they submitted these on returns on two occasions — in January, 1997 and again in January, 2001.
Any contention that plaintiffs submitted their tax returns in January, 1997 is precluded by 26 U.S.C. § 7502. That statute provides, in pertinent part:
(a) General rule. —
(1) Date of delivery. — If any return, claim, statement, or other document required to be filed, or any payment required to be made, within a prescribed period or on or before a prescribed date under authority of any provision of the internal revenue laws is, after such period or such date, delivered by United States mail to the agency, officer, or office with which such return, claim, statement, or other document is required to be filed, or to which such payment is required to be made, the date of the United States postmark stamped on the cover in which such return, claim, statement, or other document, or payment is mailed shall be deemed to be the date of delivery or the date of payment as the case may be.
(2) Mailing requirements. — This subsection shall apply only if —
(A) the postmark date falls within the prescribed period or on or before the prescribed date —
(i) for the filing (including any extension granted for such filing) of the return, claim, statement, or other document, or
(ii) for making the payment (including any extension granted for making such payment), and
(B) the return, claim, statement, or other document, or payment was, within the time prescribed in subparagraph (A), deposited in the mail in the United States in an envelope or other appropriate wrapper, postage prepaid, properly addressed to the agency, officer, or office with which the return, claim, statement, or other document is required to be file, or to which such payment is required to be made.
* * *
(c) Registered and certified mailing; electronic filing. —
(1) Registered mail. — For purposes of this section, if any return, claim, statement, or other document, or payment, is sent by United States registered mail —
(A) such registration shall be prima facie evidence that the return, claim, statement, or other document was delivered to the agency, officer, or office to which addressed; and
(B) the date of registration shall be deemed the postmark date.
(2) Certified mail; electronic filing. — The Secretary is authorized to provide by regulations the extent to which the provisions of paragraph (1) with respect to prima facie evidence of delivery and the postmark shall apply to certified mail and electronic filing.26 U.S.C. § 7502(a), (c).
Section 7502 has been construed in this Circuit as not merely creating a presumption as to the date of filing, but as precluding other methods of proving the date or fact of mailing. As the Court of Appeals for the Second Circuit stated in Deutsch v. Comm'r of Internal Revenue, 599 F.2d 44, 46 (2d Cir. 1979):
[The t]axpayer argues that Section 7502 creates a presumption in favor of the taxpayer and that, if such section does not apply, the taxpayer can prove delivery and timeliness by other evidence without benefit of the presumption. We disagree. The exception embodied in section 7502 and the cases construing it demonstrate a penchant for an easily applied, objective standard. See Fishman v. Commissioner, 420 F.2d 491 (2d Cir. 1970). Where, as here, the exception of section 7502 is not literally applicable, courts have consistently rejected testimony or other evidence as proof of the actual date of mailing. See, e. g., Shipley v. Commissioner, 572 F.2d 212, 214 (9th Cir. 1977); Drake v. Commissioner, 554 F.2d 736, 738-39 (5th Cir. 1977); Boccuto v. Commissioner, 277 F.2d 549, 553 (2d Cir. 1960).
Taxpayer further argues that it is a denial of due process to bar him from proving that he mailed his petition in any way other than provided by section 7502. We are not persuaded of any unconstitutionality in Congress' intent, manifested in section 7502, to limit proof of mailing to some type of objective evidence. Both administrative convenience and the likelihood that a petition never received was never sent support the rationale of the section.Deutsch has been followed in Washton v. United States, 13 F.3d 49 (2d Cir. 1993); Bastable v. Internal Revenue Serv., 04-CV00415 (ADS) (JO), 2004 WL 3170534 at *2 (E.D.N.Y. Dec. 27, 2004); Battle v. United States Internal Revenue Serv., supra, 1999 WL 350875 at *3; Davis v. United States, 43 Fed. Cl. 92, 94-95 n. 4 (1999); Evangelista v. United States, CV 90-4307 (ADS), 1992 WL 360346 at *4 (E.D.N.Y. Aug. 12, 1992), and remains the law in this Circuit. Although plaintiffs offer substantial circumstantial evidence that they mailed their returns for 1994 and 1995 to the IRS in January, 1997, Deutsch, and the cases that follow it, require that plaintiff's circumstantial evidence be rejected.
Defendants have offered copies of their New York State income tax refund checks for 1994 and 1995, both of which were received in 1997 (Complaint, Attachments D E). Since a New York State income tax return incorporates many of the figures calculated on the taxpayer's federal return, plaintiffs argue that their receipt of their 1994 and 1995 state tax refunds proves that they prepared their state tax returns, and the preparation of their state tax returns, in turn, implies that they had prepared their federal tax returns. Plaintiffs' logic is clearly valid and, but for Deutsch and its progeny, would clearly be sufficient to create an issue of fact. Deutsch, however, precludes consideration of this evidence.
The other possible "claim" for a refund is plaintiffs' January, 2001 submission of their tax returns in response to the IRS's November, 2000 deficiency notice. Defendant argues that these returns are nullities and always remained nullities because they were not signed (Memorandum of Law in Support of Defendant's Motion to Dismiss the Complaint, dated March 9, 2004, at 6). Although there is authority to support the IRS's argument, see Brafman v. United States, 384 F.2d 863, 868 (5th Cir. 1967) ("[U]nsigned returns, even with remittances, have been viewed as nullities from the standpoint of imposition of penalties and of commencement of the running of the statute of limitations."), the IRS's contemporaneous conduct implies that the declarations submitted by plaintiffs in August, 2001 remedied any deficiency in plaintiffs' January, 2001 submission nunc pro tunc to January, 2001. First, the two letters sent by the IRS to plaintiff in September 2001 which denied their claims for refunds each contain the following statement with respect to the 1994 and 1995 returns: "Date Claim(s) Received: January 27, 2001" (Complaint, Attachment K). Other contemporaneous conduct by the IRS also strongly suggests that it regarded the declarations submitted by plaintiffs in August, 2001 as remedying any deficiency in plaintiffs' returns. As noted above, the returns for plaintiffs prepared by the IRS showed an aggregate tax deficiency for 1994 and 1995 of approximately $54,000. Although the record is not entirely clear, it appears that after receiving the unsigned tax returns in January, 2001 (which showed no additional tax due to the IRS) and the August, 2001 declarations, the IRS ceased its efforts to collect the $54,000 deficiency. If the August, 2001 declarations did not remedy the absence of signatures on the copies of the returns submitted in January, 2001, it is difficult to understand why the IRS simply forgave an alleged $54,000 deficiency. Given the IRS's own conduct here, I shall assume, without deciding, that plaintiffs filed their 1994 and 1995 tax returns on January 27, 2001, the date the IRS admitted it received them (Complaint, Attachment K).
The declarations, which were identical, contain substantially the same language that is set forth at the foot of Form 1040:
Under penalties of perjury, I declare that I have examined the return (including any accompanying schedules and statements) referred to in this letter and, to the best of my knowledge and belief, it is true, correct, and complete.
(Complaint, Attachment J).
The next issue is whether these claims were timely, and under the law of this Circuit, they clearly were. As noted above, the first of the alternative limitations periods for filing a claim set forth in Section 6511(a) is three years from the date the return is filed. This period has been construed by the Court of Appeals in Weisbart v. United States Dep't of Treasury, supra, 222 F.3d at 95-96, to mean that a claim is timely so long as it is filed within three years from the date the return is actually filed, not three years from the date on which the return should have been filed. Since plaintiffs' 1994 and 1995 tax returns themselves contained claims for refunds and the claims were filed simultaneously with the tax returns, plaintiffs complied with the first alternative limitations period set forth in Section 6511 (a). Weisbart v. United States Dep't of Treasury, supra, 222 F.3d at 96; Altman v. Dep't of the Treas., 00 Civ. 5969 (DC), 2001 WL 1022382 at *2 (S.D.N.Y. Aug. 6, 2001).
Although plaintiffs' claims was timely made, their complaint still fails as result of the independent limitations set forth in Section 6511(b). Section 6511(b) provides, in pertinent part:
(b) Limitation on allowance of credits and refunds. —
(1) Filing of claim within prescribed period. — No credit or refund shall be allowed or made after the expiration of the period of limitation prescribed in subsection (a) for the filing of a claim for credit or refund, unless a claim for credit or refund is filed by the taxpayer within such period.(2) Limit on the amount of credit or refund —
(A) Limit where claim filed within 3-year period. — If the claim was filed by the taxpayer during the 3-year period prescribed in subsection (a), the amount of the credit or refund shall not exceed the portion of the tax paid within the period, immediately preceding the filing of the claim, equal to 3 years plus the period of any extension of time for filing the return. If the tax was required to be paid by means of a stamp, the amount of the credit or refund shall not exceed the portion of the tax paid within the 3 years immediately preceding the filing of the claim.
(B) Limit where claim not filed within 3-year period. — If the claim was not filed within such 3-year period, the amount of the credit or refund shall not exceed the portion of the tax paid during the 2 years immediately preceding the filing of the claim.
In this case, since plaintiffs did file their claim within three years of filing their returns, the limitation set forth in subparagraph (b) (2) (A) applies. In addition, since plaintiffs received a four-month extension to file their 1994 and 1995 returns, the look-back period is 40 months (3 years plus the four-month extension plaintiffs obtained) and limits plaintiffs' recovery to the portion of the taxes paid after September 27, 1997, i. e., 40 months prior to January 27, 2001.
Withholding taxes, which are the subject of plaintiffs' refund claims, are deemed paid on April 15 of the year following the calendar year in which they were actually paid. See 26 U.S.C. § 6513 (b) (1); Weisman v. Internal Revenue Serv., 972 F. Supp. 185, 187-88 (S.D.N.Y. 1997). Thus, plaintiffs' withholding taxes for 1994 and 1995 are deemed to have been paid on April 15, 1995 and April 15, 1996, respectively. Since these two dates are each outside the 40-month look-back period specified in Section 6511 (b) (2) (A), plaintiffs are time barred from seeking a refund in connection with their 1994 and 1995 income tax returns.Altman v. Dep't of the Treas., supra, 2002 WL 1022382 at *3;Devine v. United States, 98 Civ. 5744 (RPP), 1999 WL 198388 at *1 (S.D.N.Y. Apr. 7, 1999); Weisman v. Internal Revenue Serv., supra, 972 F. Supp. at 188-89; Gallo v. United States, 93 Civ. 7572 (MBM), 1994 WL 557072 at *2 (S.D.N.Y. Oct. 11, 1994).
IV. Conclusion
Accordingly, for all the foregoing reasons, defendant's motion to dismiss for lack of jurisdiction is granted and the complaint is dismissed.
Dated: New York, New York March 9, 2005.
SO ORDERED.