Opinion
Case No. 2:01-CV-526 DAK
February 13, 2003
REPORT AND RECOMMENDATION
Before the court is defendant's motion to dismiss pro se plaintiffs' complaint. See File Entry #15. However, although this motion was presented as a Rule 12(b) motion to dismiss, this court is treating it as a motion for summary judgment because this court has considered matters presented outside of the pleading. See Fed.R.Civ.P. 12(b); Jackson v. Integra Inc., 952 F.2d 1260, 1261 (10th Cir. 1991); Miller v. Glanz, 948 F.2d 1562, 1565 (10th Cir. 1991). In tact, some of the information presented outside of the pleading was presented at the court's request.See File Entry #24.
Defendant argues that this court should grant it summary judgment because plaintiffs' action is barred by the statute of limitations. The court has carefully considered the parties' memoranda, oral arguments, and the entire record before the court and hereby makes this report and recommendation.
BACKGROUND
Because this case is before this court on a motion for summary judgment, this court views the evidence and reasonable inferences drawn therefrom in the light most favorable to plaintiffs, the nonmoving parties. See Z.J. Gifts D-4, L.L.C. v. City of Littleton, 311 F.3d 1220, 1230 (10th Cir. 2002). With this standard in mind, this court recites the evidence before it.
By 1995, the Internal Revenue Service (hereafter "IRS") had informed plaintiffs that they owed back taxes. Plaintiffs requested of the IRS a full accounting of the charges and taxes owed, and the IRS provided that to plaintiffs at least two times in 1996. See File Entry #28, Exhibits 2, 4. At some point in late September or early October 1996, plaintiffs contacted United States Senator Orrin Hatch's office asking for assistance in obtaining details from the IRS. See File Entry #28.
On November 19, 1996, plaintiffs paid the IRS $60,479.11 for taxes the IRS claimed plaintiffs owed for tax years 1989, 1990, 1991, and 1994.See File Entry #28, Exhibit 5A.
On November 25, 1996, the IRS issued a notice to plaintiffs that they had overpaid their 1995 taxes by $1,020.00. See File Entry #28, Exhibit 6. The IRS explained in that notice that the overpaid amount was being applied toward the amount plaintiffs owed on their 1989 taxes. See id. However, anothor page of that same notice also specified that although plaintiffs had indicated on their 1995 tax return that they wanted $1,020.00 of their overpayment applied to another tax year, after the IRS made changes to their return, plaintiffs did not have an overpayment left. See id. Therefore, the notice provided, "Since we could not apply the amount on your return you specified, you should pay $1,020.00." Id. The IRS notice did not acknowledge the payment plaintiffs had made on November 19, 1996.
In December 1996, Sherry Adkins, who worked in Senator Hatch's office, received a telephone call from the IRS in Denver. See File Entry #28. The IRS told Ms. Adkins that plaintiffs were owed a refund; however, plaintiffs' records were being sent to Ogden, so plaintiffs would have to work with the Ogden office in the future. See id.
On December 13, 1996, the IRS issued plaintiffs a refund check for their 1989 taxes of $1,159.05. See File Entry #28, Exhibit 7. However, after receiving the conflicting November 25, 1996 notices from the IRS discussed above, plaintiffs did not cash the check for tear that the IRS would demand more money from them. See File Entry #28.
On November 19, 1997, Senator Hatch sent a letter to the Associate District Taxpayer Advocate at the IRS, forwarding a letter from plaintiffs concerning their controversy with the IRS. See File Entry #25; File Entry #26, Exhibit 1. That letter from plaintiffs disputed the demand for payment of taxes the IRS had made on plaintiffs in November 1996. See File Entry #26, Exhibit 1.
On December 22, 1997, the IRS issued plaintiffs a letter in response to Senator Hatch's inquiry. See File Entry #26, Exhibit 2; File Entry #28, Exhibit 9. The letter specifically addresses plaintiffs' payment of their 1989 taxes. See id. The IRS explained that the refund check plaintiffs had received "represented the difference between the amount due when [plaintiffs] were given a payoff date and the actual day [their] account was full [sic] paid." Id. The letter also informed plaintiffs that they could file a claim for a refund on the 1989 taxes within two years from December 16, 1996, the date their 1989 taxes were paid. See id.
On April 10, 1998 the IRS issued another check to plaintiffs for $267.36. See File Entry #28, Exhibit 10. That check indicates that it is a tax refund for 1989. See id.
In the spring of 1998, Mr. Holt wrote a letter to Sherry Adkins from Senator Hatch's office again asking for help with his conflict with the IRS. See File Entry #28, Exhibit 11. AS a part of that letter, Mr. Holt asked Ms. Adkins to help him receive a hearing before a judge "from the United States Court of Federal Claims." Id.
In the summer of 1998, plaintiffs received an IRS Form 656 "Offer in Compromise." See File Entry #28, Exhibit 12. Plaintiffs were advised to not act upon the offer because they were seeking a hearing regarding their attempt to obtain a tax refund. See File Entry #28.
On December 31, 1998, the IRS received plaintiffs' completed form 1040-X for tax year 1989, and completed forms 1040 for tax years 1989, 1990, 1994. See File Entry #28, Exhibit 13; see also File Entry #26, Exhibit 3. These forms were produced by plaintiffs' accountant and are dated December 24, 1998. See Id.
On February 12, 1999, the IRS sent plaintiffs a letter regarding plaintiffs' 1989 taxes. See File Entry #26, Exhibit 4; File Entry #28, Exhibit 14. The letter explains that plaintiffs' claim for a refund on their 1989 taxes had been denied because it was barred by the statute of limitations. See id. The letter explained to plaintiffs that they had two years from the mailing of the letter to appeal the IRS' decision. See id.
On February 3, 2000, plaintiffs wrote to the IRS concerning correspondence they had received from that agency. See File Entry #25; File Entry #26, Exhibit 5. In that letter, plaintiffs state, "[W]e are still waiting for a $39,000 refund we were informed by telephone we would get." File Entry #26, Exhibit 5.
On March 29, 2000, the IRS sent plaintiffs a letter regarding their 1998 taxes. See File Entry #28, Exhibit 15. That letter was responding to plaintiffs' February 3, 2000 letter of inquiry. See id. The IRS' letter simply notified plaintiffs that their case was being transferred, again, to another department, which was supposed to contact plaintiffs within sixty days. See Id.
At some point before June 29, 2000, plaintiffs contacted the Taxpayer Advocate Service (hereafter TAS). The TAS immediately began looking into whether and how plaintiffs could receive money back for the alleged tax overpayment they made on November 19, 1996.
On June 29, 2000, the TAS sent plaintiffs a letter in response to their inquiry about federal tax returns being filed timely. See File Entry #25; File Entry #26, Exhibit 6. The letter discussed the results of research by the TAS into the plaintiffs' tax records for each year in question. See File Entry #26, Exhibit 6. The TAS noted that "the assessments and adjustments of [plaintiffs'] taxes, penalties, and interest seem to be correct." Id. On July 10, 2000, plaintiffs provided the TAS with a copy of their tax return for calendar year 1991, which was delivered to an IRS official on August 14, 1996. See File Entry #25; File Entry #26, Exhibit 7.
On August 25, 2000, the TAS wrote plaintiffs to inform them that their 1991 tax account had been adjusted, but that no refund could be provided because it was barred by the statute of limitations. See File Entry #25; File Entry #26, Exhibit 8. However, on November 3, 2000, the IRS issued plaintiffs a check for $18,957.65. See File Entry #28, Exhibit 16. The check indicated that it was a tax refund for 1991. See id. It also indicated that it included $5,049.33 in interest, meaning that was a refund for $13,908.32 in taxes. See id.
On November 18, 2000, in response to a telephone call from plaintiffs, the TAS sent plaintiffs a letter detailing the IRS' actions concerning taxes for 1989 and 1990. See File Entry #25; File Entry #26, Exhibit 9. In response to a November 27, 2000 telephone call from plaintiffs, on November 28, 2000, the TAS sent plaintiffs a letter and four copies of IRS Form 843, Claim for Refund and Request for Abatement. See File Entry #25; File Entry #26, Exhibit 10; File Entry #28, Exhibit 17. The TAS asked plaintiffs to return the completed forms regarding the tax years for which plaintiffs sought tax refunds. See id.
On January 17, 2001, the TAS sent plaintiffs a letter and printout from the IRS of actions taken on plaintiffs' 1991 federal tax account. See File Entry #23, Exhibit 18. On January 22, 2001, the TAS sent plaintiffs another letter acknowledging that it had received the completed Forms 843 from plaintiffs, but asking for a more detailed explanation of why plaintiffs felt they were entitled to the refunds sought. See File Entry #25; File Entry #26, Exhibit 11; File Entry #28, Exhibit 19. On January 25, 2001, plaintiffs provided the TAS a hand-written letter detailing their contentions concerning the tax liabilities in question.See File Entry #25; File Entry #26, Exhibit 12. Also on January 25, 2001, plaintiffs provided the TAS with copies of completed Forms 843 For tax years 1989, 1990, 1991, and 1994, all four tax years at issue in this case. See File Entry #25; File Entry #26, Exhibit 13.
As Mr. Holt explained in oral argument, he and Mrs. Holt had already sent this requested information to the IRS at least two times before the TAS' request of January 22, 2001. See 1-21-03 Hearing Transcript at 6, 7.
On February 27, 2001, the TAS sent plaintiffs another letter explaining that it was enclosing the assessments made by its office on plaintiffs' accounts. See File Entry #25; File Entry #26, Exhibit 14; File Entry #28, Exhibit 20. The TAS further explained that it had been able to resolve the 1991 claim, but not the 1989, 1990, and 1994 claims, and that plaintiffs' account with its office was closed. See id. The TAS explained that it had provided all assistance possible to plaintiffs and advised plaintiffs that their only remaining course of action was to file an amended tax return for the tax years they disagreed with. See id.
The documents sent with this letter to the plaintiffs indicate that if plaintiffs' claims had not been barred by the statute of limitations, plaintiffs would have been entitled to a refund for 1989, 1990, and 1994.See File Entry #28, Exhibit 20.
On March 13, 2001, the IRS received a Form 1040-X concerning plaintiffs' tax liability for tax year 1989. See File Entry #25; File Entry #26, Exhibit 15. Although the signing date was different on this form, this form otherwise appeared to be a copy of the Form 1040-X plaintiffs submitted on December 24, 1998. See File Entry #25, n. 3.
On April 3, 2001, the TAS sent Mrs. Holt a letter giving her the names and identification numbers of people to work with in that office. See File Entry #28, Exhibit 21. On April 9, 2001, the IRS responded to plaintiffs' March 13, 2001 letter. See File Entry #28, Exhibit 22. That letter was written regarding plaintiffs' 1990 tax claim. The IRS letter explained that it bad not addressed plaintiffs' claim because it was too busy. See id.
On July 13, 2001, the IRS sent plaintiffs an official denial of their 1989 and 1990 claims. See File Entry #25; File Entry #26, Exhibit 16; File Entry #28, Exhibit 23. That letter explained that plaintiffs' claims were barred by the statute of limitations. See id. That letter also explained plaintiffs' right to appeal the IRS' decision. See id.
Also on July 13, 2001, plaintiffs filed this action, and the case was assigned to United States District Judge Dale A. Kimball. See File Entry #1. Judge Kimball then referred this case to United States Magistrate Judge Samuel Alba. See File Entries #2, 3.
On April 18, 2002, defendant filed its motion to dismiss. See File Entry #15. On May 15, 2002, plaintiffs filed a memorandum in opposition to the motion to dismiss. See File Entries #16, 17. Magistrate Judge Alba heard oral arguments on defendant's motion on August 22, 2002. See File Entry #19; August 22, 2002 Transcript of Motion Hearing, Lodged in File. Following oral arguments, defendant filed a supplemental memorandum asking the court to dismiss the case. See File Entries #20, 21. Plaintiffs then filed a supplemental memorandum opposing defendant's motion to dismiss. See File Entry #22.
On December 10, 2002, Magistrate Judge Alba issued an order requesting the parties file a timeline and documents. See File Entry #24. Defendant filed its timeline and documents on January 15, 2003, and plaintiffs submitted theirs on approximately January 16, 2003. See File Entries #25, 26, 28. On January 21, 2003, Magistrate Judge Alba again heard oral arguments on defendant's motion to dismiss. See File Entry #27; January 21, 2003 Transcript of Hearing on Motion to Dismiss.
PLAINTIFFS' CLAIM
In their complaint, plaintiffs seek relief under 42 U.S.C. § 1983 and 1985. See File Entry #1. However, plaintiffs complaint was filed to seek a tax refund for tax years 1939, 1990, 1991, and 1994. See id. at 4-7. Plaintiffs have admitted that their complaint was meant to be "a request for a refund of taxes." Pile Entry #17. Therefore, this court addresses their action as one seeking a refund of taxes rather than as a non-refund action, such as a civil rights or tort action.
STANDARD OF REVIEW
As discussed above, although defendant submitted a motion to dismiss, this court is treating that motion as a motion for summary judgment. . . . Therefore, this court applies the legal standard required for summary judgment motions. Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see also United States v. Botefuhr, 309 F.3d 1263, 1270 (10th Cir. 2002).
ANALYSTS A. 1991. Tax Refund Claim
Before addressing the statute of limitations issue raised by defendant, this court first addresses defendant's argument that plaintiffs' refund claim regarding their 1991 taxes has already been resolved by the IRS.
On November 3, 2000, the IRS issued plaintiffs a refund check for $18,957.65. See File Entry #28, Exhibit 16. Written on that check were words explaining that it was a tax refund for 1991. See id. Also written on that check were words explaining that it included $5,049.33 in interest. See id. Therefore, the check was a tax refund of $13,908.32. plus interest, from plaintiffs' 1991 taxes.
Plaintiffs have also presented this court with a copy of a note written by plaintiffs' accountant, Ms. Dana Schmutz, from November 8, 1996. See File Entry #28, Exhibit 5. Plaintiffs have explained that Ms. Schmutz wrote the note either while or after speaking to the IRS about plaintiffs' payoff amount, which they later made on November 19, 1996.See File Entry #28. That note contains a breakdown of the payoff amount for all four years at issue in this case. See File Entry #28, Exhibit 5. The amount written next to 1991 is $13,884.21. See Id. Notably, this amount is slightly smaller than the amount plaintiffs received in the refund check the IRS sent them on November 3, 2000.
Because the evidence presented to this court shows that plaintiffs have already received a full refund of their 1991 tax refund claim, including interest, this court recommends that defendant be granted summary judgment regarding plaintiffs' 1991 tax refund claim. The court next turns to defendant's statute of limitations argument regarding plaintiffs' 1989, 1990, and 1994 tax refund claims.
B. 1989, 1990, and 1994 Tax Refund Claims
"Under settled principles of sovereign immunity, `the United States, as sovereign, "is immune from suit, save as it consents to be sued . . . and the terms of its consent to be sued in any court define that court's jurisdiction to entertain the suit."'" United States v. Dalm, 494 U.S. 596, 608, 110 S.Ct. 1361, 1368 (1990) (quoting United States v. Testan, 424 U.S. 392, 399, 96 S.Ct. 948, 953 (1976) (quoting United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 769 (1941))); Schimer v. United States, 1995 WL 20417, at *2 (10th Cir. 1995). "A statute of limitations requiring that a suit against the Government be brought within a certain time period is one of those terms." Dalm, 494 U.S. at 608, 110 S.Ct. at 1368. "`[A]lthough [courts] should not construe such a time-bar provision unduly restrictively, [courts] must be careful not to interpret it in a manner that would "extend the waiver beyond that which Congress intended."'" Id. (citations omitted); see also Schimer v. United States, 1995 WL 20417, at *2 (10th Cir. 1995) ("Federal jurisdiction `must affirmatively and distinctly appear . . . and cannot be helped by presumptions or by argumentative inferences drawn from pleadings.'" (Citations omitted.)).
Although the United States has waived sovereign immunity for tax refund suits, taxpayers can only bring such suits if they have first "duly filed," or timely and properly filed, a claim for a refund or credit. 42 U.S.C.A. § 7422(a) (2002). Failure to file a timely claim for a refund deprives a court of subject matter jurisdiction over a refund action. See Dalm, 494 U.S. at 602, 110 S.Ct. at 1365 ("[U]nless a claim for refund of a tax has been filed within the time limits imposed . . . a suit for refund . . . may not be maintained in any court.")
A claim for a tax refund or credit must be filed by the taxpayer with the IRS within three years from the time the return was filed or two years from the time the tax was paid, whichever period expires later.See 26 U.S.C.A. § 6511(a) (2002). If the taxpayer has not. filed a tax return, the taxpayer must file the claim for refund or credit within two years from the time the tax was paid. See id.
Defendant argues that because plaintiffs failed to file a proper refund claim for the tax years in question within the required time period, plaintiffs have failed to meet this prerequisite to suit, the court lacks subject matter jurisdiction, and the court should grant summary judgment in its favor. This court therefore first examines whether plaintiffs' refund action was timely filed.
Plaintiffs' tax return for tax year 1989 was filed on April 20, 1993.See File Entry #21, Exhibit 1. The IRS received final payment on the liabilities arising from this tax return on November 20, 1996, and the undeposited refund check of $1,159.05 was redeposited to plaintiffs' 1989 tax account on December 16, 1996. See id. Therefore, the latest date plaintiffs could file a timely refund claim was either November 20, 1998, or December 16, 1998, two years from the time the tax was paid. Plaintiffs filed an amended tax return Form 1040-X seeking a refund on their 1989 taxes on December 31, 1998. See File Entry #21, Exhibit 5. Their accountant dated their return December 21, 1998. See Id. Therefore, even if it considers the most favorable dates for plaintiffs in calculating the statute of limitations, this court must conclude that plaintiffs' refund claim for their 1989 taxes was not timely filed.
Plaintiff' tax return on their 1990 taxes was filed on April 20, 1994.See File Entry #21, Exhibit 2. The IRS received final payment on the liabilities arising from plaintiffs' 1990 tax return on November 20, 1996. See Id. Therefore, the latest date for plaintiffs to file a timely refund claim was November 20, 1998, two years from the date the tax was paid. However, plaintiffs did not contact the TAS until sometime between March and June of 2000. Cf. File Entry #28, Exhibit 15 with File Entry #25; File Entry #26, Exhibit 6. Further, plaintiffs did not file an amended tax return seeking a refund on their 1990 taxes until March 13, 2001. See File Entry #21, Exhibit 2. Therefore, even considering the dates most favorable to plaintiffs, this court must conclude that plaintiffs' claim for a refund on their 1990 taxes was not timely filed.
The record is unclear when plaintiffs first contacted the TAS. Plaintiffs remembered contacting it around September or October of 2000,see File Entry #28; however, a letter exists from June 29, 2000, which was from the TAS to plaintiffs regarding plaintiffs' dispute with the IRS, see File Entry #26, Exhibit 6.
Plaintiffs filed their tax return for tax year 1994 on October 18, 1995. See File Entry #21, Exhibit 4. The IRS received plaintiffs' final payment on the liabilities arising from that tax return on November 20, 1996. See id. Therefore, the latest date for plaintiffs to file a timely refund claim was November 20, 1998, two years from the date the tax was paid. However, plaintiffs did not contact the TAS until sometime between March and June of 2000. Cf. File Entry #28, Exhibit 15 with File Entry #25; File Entry #26, Exhibit 6. Further, plaintiffs did not file an amended return claiming a refund on their 1994 taxes until March 13, 2001. See File Entry #21, Exhibit 4. Therefore, even looking at the dates most favorable to plaintiffs, this court must conclude that plaintiffs' claim for a refund on their 1994 taxes was not timely filed. Therefore, based on the information before it, this court concludes that plaintiffs' 1989, 1990, and 1994 tax refund claims all were not timely filed.
Plaintiffs argue that applying the statute of limitations to bar their claims would be unfair because of the actions both they and the IRS took up until the day plaintiffs filed this lawsuit. Plaintiffs argue that they were diligent in seeking to recover their monies and promptly filed their complaint in this action the day they discovered negotiations and recovery efforts with the IRS had ultimately broken down. Plaintiffs argue that no case or controversy existed before they filed their action because they were working out an amicable resolution with the IRS regarding this matter. Plaintiffs further argue that the law should not encourage people to rush to the courthouse until administrative attempts to remedy the situation have been exhausted, Plaintiffs argue that by granting defendant's motion this court would reward the IRS for drawing out negotiations by making promises of amicable resolution until the statute of limitations had run.
This court agrees that plaintiffs did make an effort during the time period at issue in this case to amicably resolve their dispute with the IRS. This court also agrees that the IRS inefficiently transferred plaintiffs' claims from one agency to another during the time plaintiffs sought a resolution to the matter. In addition, this court is well aware of the benefit of people working out their disputes rather than rushing to file lawsuits at the slightest disagreement or offense.
This court notes that to meet the statute of limitations requirement, plaintiffs did not need to file a lawsuit in court; instead, plaintiffs were required to file a refund claim with the IRS, as they did when they filed their Forms 1040-X and specifically indicated that they were claiming a refund.
However, this court is not at liberty to rewrite the law. As discussed above, in order for this court to have jurisdiction in this case, the law unequivocally requires that plaintiffs must have filed a timely refund claim with the IRS for each of the three years at issue. Based on the above analysis, it appears that each of plaintiffs' three refund claims are time barred; however, based on plaintiffs' arguments, this court will examine various legal theories by which plaintiffs' claims may be perceived as timely filed and by which this court may still have jurisdiction over this case.
This court also notes, to address certain suggestions made by plaintiffs, that the IRS cannot waive the statute of limitations, as it is a jurisdictional requirement. See Northern Life Ins. Co. v. United States, 685 F.2d 277, 279 (9th Cir. 1982) ("The filing of a timely claim is jurisdictional for a refund suit and cannot be waived."); Malonek v. United States, 923 F. Supp. 1462, 1465 (D. Wyoming 1996) ("[T]he IRS cannot waive the statute of limitations."). Furthermore, the evidence does not suggest that the IRS ever agreed to somehow extend the statute of limitations.
1. Informal Refund Claim
First, this court examines whether plaintiffs' three claims were timely filed as informal refund claims.The United States Supreme Court has explained that
a notice fairly advising the Commissioner of the nature of the taxpayer's claim, which the 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 defect's and lack of specificity have been remedied by amendment filed after the lapse of the statutory period. This is especially the case where such a claim has not misled the Commissioner and he has accepted and treated it as such.United States v. Kales, 314 U.S. 186, 194, 62 S.Ct. 214, 218 (1941) (citations omitted). "`There are no rigid guidelines'" regarding an informal claim "`except that an informal claim must have a written component and should "adequately apprise the Internal Revenue Service that a refund is sought for certain years."'" Mills v. United States, 890 F.2d 1133, 1135 (11th Cir. 1989) (quoting Arch Enqineering Co., Inc. v. United States, 783 F.2d 190, 192 (Fed. Cir. 1986)); see also Wertz v. United States, 51 Fed. Cl. 443, 447 (Fed.Cl. 2002). In addition,
[i]t is not enough that the [IRS has] in its possession information from which it might deduce that the taxpayer is entitled to, or might desire, a refund; nor is it sufficient that a claim involving the same ground has been filed for another year or by a different taxpayer. On the other hand, the writing should not be given a crabbed or literal reading, ignoring all the surrounding circumstances which give it body and content. The focus is on the claim as a whole, not merely on the written component. In addition to the writing and some form of request for a refund, the only essential is that there be made available sufficient information as to the tax and the year to enable the [IRS] to commence, if it wishes, and [sic] examination into the claim.American Radiator Standard Sanitary Corp. v. United States, 318 F.2d 915, 920 (Cl.Ct. 1963) (citations omitted). Written correspondence regarding a dispute with the IRS or verbal communication does not sufficiently apprise the IRS that the taxpayer is seeking a refund to constitute an informal refund claim. See Malonek v. United States, 923 F. Supp. 1462, 1467 (D. Wyoming 1996). Therefore, in order to file an effective informal claim, a taxpayer must submit a writing to the IRS that claims a refund for a particular year.
This court has carefully read each of the written documents presented to it in this case. Even taking into account the surrounding circumstances that would give plaintiffs' writings body and content, this court is unable to conclude that plaintiffs submitted an informal refund claim to the IRS by November 20, 1998, when the statute of limitations had run and plaintiffs' claim became time-barred. Although plaintiffs communicated with the IRS over several years regarding their dispute, this court is unable to find a writing from plaintiff within the required time period that would meet the requirements of an informal refund claim for any of the three years at issue. As discussed above, it is not enough that the IRS may have had in its possession information from which it might deduce that plaintiffs were either entitled to a refund or that they desired to file refund claims. Further, it is not. enough that the IRS and plaintiffs had contact regarding the disputed taxes; the law requires that a written request specifically indicating that the taxpayer seeks a refund for the particular years at issue be sent to the IRS. As a result, this court must conclude that plaintiffs did not submit a valid informal claim to the IRS for any of the years at issue during the necessary time period to toll the statute of limitations.
2. Equitable Estoppel
The court next examines whether, based on assurances given to plaintiffs by the IRS that plaintiffs would receive a refund, defendant should now be equitably estopped from raising the statute of limitations as a defense in this case.
In the Tenth Circuit, equitable estoppel is only applicable against the United States if the opposing party proves the following five elements: (1) an agent of the United States knew certain facts; (2) that agent intended that his or her conduct would be acted upon, or so acted that the party asserting the estoppel has the right to believe that it was so intended; (3) the party asserting the estoppel was ignorant of the true facts; (4) the party asserting the estoppel relied on the agent's conduct to his or her injury; and (5) there was affirmative misconduct on the part of the government or its agent. See Penny v. Giuffrida, 897 F.2d 1543, 1545-46 (10th Cir. 1990).
However, even accepting plaintiffs' assertions regarding their contacts with the IRS as true, plaintiffs do not meet at least the third element listed above because the IRS specifically informed them of the requirement to file a timely claim for refund. In response to Senator Hatch's inquiry, the IRS sent plaintiffs a letter on December 22, 1997, that specifically notified them of their right to file a claim for refund and the time limitations that would apply to such claims. See File Entry #26, Exhibit 2; File Entry #28, Exhibit 9. This letter was sent nearly eleven months before the statute of limitations expired on each of plaintiff's three disputed claims. As plaintiffs were aware of both the necessity of filing a refund claim and the time limitations involved, equitable estoppel is not appropriate in this case. The court next examines whether the doctrine of equitable tolling applies to plaintiffs' case.
3. Equitable Tolling
The government's actions, under certain circumstances, may equitably toll the statute of limitations in order to serve the ends of justice where technical forfeitures would unjustifiably prevent a trial on the merits. See Holmberg v. Armbrecht, 327 U.S. 392, 395-96, 66 S.Ct. 582, 584 (1946); Brennan v. United States, 1994 WL 327621, at *2 (Co. Cal. 1994). It is unclear whether this doctrine is available in this case because this court's jurisdiction depends upon whether plaintiffs complied with the statute of limitations. See Amoco Production Co. v. Newton Sheep Co., 85 F.3d 1464, 1471 (10th Cir. 1996).
However, even assuming the doctrine is available, this court concludes that it would not apply to plaintiffs' case. "[A] party seeking to prove that equitable tolling applies must show, at a minimum, that the government, did something which reasonably induced them to believe that the statute of limitations was being tolled or had been extended."Malonek, 923 F. Supp. at 1468. Plaintiffs have not made that showing in this case. Although plaintiffs received a bureaucratic runaround from the IRS, they were not without adequate recourse. Plaintiffs may have been opposed to adding unnecessary litigation to the court system, but theycould have filed a tax refund claim within the required time period. See Montoya v. Chao, 296 F.3d 952, 958 (10th Cir. 2002) "This was not a situation in which the taxpayers had no knowledge that they would potentially have a refund claim." Amoco Production Co., 85 F.3d at 1471. Furthermore, as discussed above, the IRS specifically gave plaintiffs notice of their need to file a refund claim within the applicable statute of limitations. Thus, the IRS did not deceive plaintiffs about their need to file a refund claim within the required period of time, and thus equitable tolling does not apply to plaintiffs' case. The court next examines the doctrine of equitable recoupment.
4. Equitable Recoupment
"The doctrine of equitable recoupment is available to both the taxpayer and the government, depending on the circumstances, where inequitable consequences have resulted from application of the statute of limitations." O'Brien v. United States, 766 F.2d 1038, 1048 (7th Cir. 1935). However, a prerequisite to one's ability to use this doctrine is that "`the offsetting amount from the year barred by the statute of limitations must result from the same transaction which gave rise to the refund or deficiency in the open year.'" Id. at 1049 (citation omitted). It may be used only where "`a single transaction constitute[s] the taxable event claimed upon and the one considered in recoupment.'" Id. (citation omitted). Recoupment allows a taxpayer "to recoup an erroneously paid tax, the refund of which is time-barred, against a timely and correctly asserted deficiency by the government." Id.
However, this doctrine is not available for plaintiffs' use in this case. When a taxpayer seeks the benefits of this doctrine, the doctrine serves "`to allow the taxpayer to reduce the amount of a deficiency recoverable by the Government by the amount of an otherwise barred overpayment of the taxpayer.'" Id. at 1049 (quoting Brigham v. United States, 470 F.2d 571, 577 (Ct.Cl. 1972), cert. denied, 414 U.S. 831, 94 S.Ct. 62 (1973)). Here, plaintiffs are not seeking to reduce deficiencies in later years; they are seeking a refund of taxes for barred years. Furthermore, "[a]ttempts by taxpayers to utilize the doctrine to revive an untimely affirmative refund claim, as opposed to offset a timely government claim of deficiency with a barred claim of the taxpayer, have been uniformly rejected." Id. at 1049; see also Dalm, 494 U.S. at 609, 110 S.Ct. at 1368 (explaining that due to sovereign immunity, taxpayer may not use doctrine of equitable recoupment where taxpayer failed to comply with statutory requirements for seeking a tax refund). As a result, this court concludes equitable recoupment is not available to plaintiffs' case.
5. Equity
Finally, this court also examines whether plaintiffs claims can proceed by applying other principles of equity. This court concludes that they may not. As explained above, the United States has waived sovereign immunity in tax refund cases, but only to the extent that the statute is complied with, including that claims are timely filed. This court does not have authority to grant plaintiffs equitable relief because "`general principles of equity may not override statutory requirements for timely filing of tax refund claims.'" Republic Petroleum Corp. v. United States, 613 F.2d 518, 527 (5th Cir. 1980) (citation omitted); see also Young v. United States, 203 F.2d 686, 689 (8th Cir. 1953) ("[A]s it has so frequently been said, general principles of equity may not be applied in tax cases, but claims must be brought within the scope of statutory authority for their allowance.")
6. Conclusion
Unfortunately, as a result, this court concludes that it lacks jurisdiction because plaintiffs' claims are barred by the statute of limitations. This court joins with a previous court in its sentiments:
All that the Court can say on [plaintiffs'] behalf is that they pay their accountant to know the rules, and he should have contacted the IRS before the statute expired. In addition, this case provides everyone with a lesson: tile protective claims if there is even the slightest doubt about filing deadlines. Although the Court doubts that the IRS truly needs the blizzard of protective claims it should receive as a result of this and similar advice, that apparently is what the tax code and the IRS require.Malonek, 923 F. Supp. at 1469; see also United States v. Commercial Nat'l Bank of Peoria, 874 F.2d 1165, 1176 (7th Cir. 1989) (encouraging taxpayers to file conditional or protective tax claims); Malonek, 923 F. Supp. at 1465 n. 1 (discussing the unfairness of the statute of limitations applicable to tax refund. claims)
RECOMMENDATION
Based on the above analysis, IT IS RECOMMENDED that the court GRANT defendant's motion for summary judgment. ( file entry #15, filed as a motion to dismiss). plaintiffs have already received a full refund, plus interest, on their 1991 tax refund claim and the court lacks jurisdiction over plaintiffs' 1989, 1990, and 1994 tax refund claims because they are barred by the statute of limitations.
Copies of the foregoing report and recommendation are being mailed to the parties who are hereby notified of their right to object to the same. The parties are further notified that they must file any objections to the report and recommendation, with the clerk of the district court, pursuant to 28 U.S.C. § 636(b), within ten (10) days after receiving it. Failure to file objections may constitute a waiver of those objections on subsequent appellate review.