Wachovia Bank, N.A. v. U.S.

Full title: WACHOVIA BANK, N.A. etc., Plaintiff, v. UNITED STATES OF AMERICA, Defendant

Court: United States District Court, M.D. Florida, Jacksonville Division

Date published: Mar 18, 2005

3:03-CV-790-J-25 TEM (M.D. Fla. Mar. 18, 2005)

Opinion

3:03-CV-790-J-25 TEM.

March 18, 2005

ORDER

HENRY LEE ADAMS, Jr., District Judge

This Cause is before the Court on the parties cross Motions for Summary Judgment (Dkts. 15 and 17). Upon consideration, the Court finds as follows:

I. Background Facts

Wachovia's Complaint seeks return of federal income tax paid for tax years 1997 and 1998 on a trust; Wachovia is the trustee. The underlying facts are not in dispute. The trust has been exempt from federal income tax under 26 U.S.C. Section 664(b), which governs charitable remainder trusts, since July 9, 1991. Specifically, the trust is exempt from tax under I.R.C. Section 664(c).

However, Wachovia erroneously filed returns for 1997 and 1998 on the trust and paid tax. After realizing its error, Wachovia sought a refund of the tax paid. The Internal Revenue Service (IRS) denied Wachovia's claim for a refund of the tax in question because it maintains that the statute of limitations for a refund request has expired; the requests were received after the expiration of the three year period for filing administrative refund claims that is provided by Section 6511(a) of the Internal Revenue Code. 26 U.S.C. Section 6511(a).

Wachovia brought this action against the United States, seeking to recover its erroneous payments. The United States contends that Wachovia's failure to file its administrative refund claim on time deprives this Court of jurisdiction to entertain this matter.

II. Summary Judgment Standard

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 judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In reaching a summary judgment decision the court must view the facts in the light most favorable to the non-moving party. United of Omaha Life Ins. Co. v. Sun Life Ins. Co. Of America, 894 F.2d 1555, 1558 (11th Cir. 1990). However, in order to avoid entry of summary judgment the non-moving party "may not rest upon the mere allegations or denials" of his pleadings; instead, the non-moving party "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e).

III. Analysis

The only relevant issue before this Court is whether the limitations period found in Section 6511(a) for filing refund claims with the Treasury applies to Wachovia's claim. Wachovia contends that the three year limitations period for filing refund claims set forth in Section 6511(a) is inapplicable to its claim. That Section provides,

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 two 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 three years from the time the tax was paid.

26 U.S.C. Section 6511(a) (emphasis added).

The dispute here focuses on the meaning of the phrase in the first sentence, "in respect of which tax the taxpayer is required to file a return." Wachovia argues that the effect of this language is to restrict the application of Section 6511(a)'s first sentence to refund claims filed by taxpayers who are required to file a return for the particular tax they paid. Since the trust was not required to file a return, Wachovia argues that the timeliness of its administrative refund claim is not governed by Section 6511(a). Wachovia submits that Section 6511(a) "could not be clearer." Wachovia notes that its claim was made within the six years allowed generally for the bringing of "civil actions against the United States." 28 U.S.C. Section 2401(a). Wachovia argues that the Court should apply the six year statute of limitations to its claim. The Court notes that Section 6511 does not specifically discuss the situation where a taxpayer overpays taxes when it is not required to file a return.

Wachovia urges this Court to extend the Sixth Circuit's holding in State of Michigan v. United States, 141 F.3d 662 (6^th Cir. 1998) to this factual scenario. In Michigan, the Court had to decide how much interest was due to a trust that erroneously paid federal taxes. The IRS urged the Court to find that the trust was due interest only from the date the tax was due, rather than accept the trust's argument that it was due interest from an earlier date — the date the tax was actually paid. As in the instant case, the Court had to examine whether a Code provision applied only to taxpayers required to file a return.

The Court found for the trust, holding that the Code Section that the government urged the Court to apply. I.R.C. Section 6513(b)(2), actually applies only to entities not required to file a return under another Code Section. The Court held that because Michigan's trust income at issue was not subject to federal taxation under that Code Section, and because Section 6513(b) applies only to taxable income, the more general provision that the trust urged the court to apply controlled.

Thus, the Court held that the trust in the Michigan case was entitled to receive interest on estimated tax payments from the date the actual payments were made rather than from the purported due date for it to file its return.¹

1 In Michigan, the Court discussed the case the government urges the Court to rely upon in the instant case: Little People's School, Inc. v. United States, 842 F.2d 570 (1^st Cir. 1988).
In Michigan, the Sixth Circuit criticized the First Circuit's logic and also distinguished the case, noting that Little People's involved a determination under 6511 (a) in conjunction with 7422(a); the Court noted that neither Code Section was implicated in the case before it.

Wachovia contends that the reasoning in Michigan applies to its argument in the instant case; because Wachovia (like Michigan) was not required to file a tax return and pay taxes, the specific provision the government cites (in this case the statute of limitations) does not apply to it. In sum, Wachovia argues that the three year statute of limitations applies only to entities required to file a return for the tax year in question.

Conversely, the United States argues that the three year limitations period found in Section 6511 does apply to the instant case. The government maintains that the first sentence of Section 6511(a) cannot be read in isolation; the Court must consider the purpose of Section 6511(a) by referencing related Code provisions.² The United States argues that its proposed interpretation of Section 6511(a) is supported by the statute's legislative history, the Treasury regulation promulgated thereunder, the text of the precursor statute, and the rule that statutes waiving sovereign immunity must be strictly construed. The government contends that Wachovia's position suffers from "interpreting a single sentence in isolation" and argues that a court must always interpret a statutory provision with reference to its context within the statute itself.³

2 As noted in Little People's, and also argued in the instant case, the United States claims that the two sentences comprising Section 6511(a), read together, reflect a division of administrative refund claims into: (1) claims for taxes payable by return, and (2) claims for taxes payable by stamp. According to the government, because income taxes are payable by return, the refunds for overpayments are governed by the limitations set forth in the first sentence of Section 6511(a).

3 The Court in Little People's stated, "The process by which legislation becomes binding law is not a piecemeal one; statutes are not passed sentence by sentence, or clause by clause. It follows that a court's interpretation of a single provision necessitates consideration of the statute in its entirety, deriving the meaning of a part from the whole of the words and phrases that the legislature declared to be the law. In view of this principle we are persuaded, notwithstanding our regard for the plain meaning rule and its able champion in this case, that the government's interpretation of Section 6511(a) is correct." Id. at 573.

Because Section 7422(a) establishes the filing of an administrative refund claim as a prerequisite to bringing a civil suit for a tax refund, the government submits that it only makes sense to interpret the limitations in Section 6511(a) as pertaining to all such refund claims. Section 7422 of the Code is titled, "Civil actions for refund." Subsection (a) thereunder states, "No suit prior to filing claim for refund." That subsection provides in relevant part,

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 . . . until a claim for refund or credit has been duly filed with the Secretary or his delegate, according to the provisions of law in that regard, and the regulations of the Secretary or his delegate established in pursuance thereof.

26 U.S.C. Section 7422(a)(1982).

According to the government, if Section 6511(a)applies only to a limited class of administrative refund claims (those brought by taxpayers required to file returns and no others), there is no alternative provision that would limit the period for bringing administrative refund claims where such claims were brought by taxpayers such as Wachovia ( i.e., taxpayers not required to file returns).

The government maintains that the alternative reading of the Code urged by Wachovia makes little sense; it is unlikely that Congress would have enacted a statute mandating the filing of an administrative claim as a prerequisite to a civil action while at the same time exempting a certain class of these claims from a statute of limitations. The United States also notes that the function of a statute of limitations is to dismiss stale claims without regard to their substantive merit. The government argues that Wachovia's proposed construction would require a court to make a preliminary inquiry into whether the plaintiff was required to file a return before deciding whether Section 6511(a) applies.

As discussed in Little People's, however, the most "natural" meaning of the first sentence of Section 6511(a) is the one urged by Wachovia. As stated by the Supreme Court, "the starting point for interpreting a statute is the language of the statute itself." Consumer Prod. Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980). Further, "[a]bsent a clearly expressed legislative intention to the contrary, [the statutes' language] must generally be regarded as conclusive." Id. "If [the language of the statute] is plain. . . . the sole function of the courts is to enforce it according to its terms. Courts must assume that Congress intended the ordinary meaning of the words it used . . ." Gonzalez v. McNary, 980 F.2d 1418, 1420 (11^th Cir. 1993) (internal citation omitted). The government has not proffered evidence of a "clearly expressed legislative intention to the contrary." The language of the statute is simply unambiguous. Thus, this Court interprets the language in Section 6511 "in respect of which tax the taxpayer is required to file a return" as meaning exactly what it says; it applies only to taxpayers who are required to file returns. Since Wachovia was not required to file a return, its refund request is not governed by the three year limitations period found in Section 6511.

Accordingly, it is ORDERED:

Plaintiff's Motion for Summary Judgment is GRANTED; Defendant's Motion for Summary Judgment is DENIED. All pending motions are MOOT and the clerk is directed to enter judgment in favor of the Plaintiff and close the file.

DONE AND ORDERED.