Opinion
CASE NO. 01-C V-708 H (POR)
August 31, 2001
Order Granting Motion to Dismiss for Lack of Subject Matter Jurisdiction
On April 23, 2001, plaintiffs John 3. Pavlik and Shirley A. Troxel, proceeding pro se, filed a Complaint to recover a tax penalty allegedly assessed against them in error in the amount of $2,500.00. On July 10, 2001, Defendant filed a Motion to Dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. Plaintiff filed an untimely Opposition to the Motion on August 20, 2001. Defendant filed a Reply on August 27, 2001. The Motion is submitted on the papers without oral argument pursuant to Local Rule 7.1 (d.1).
I. Background
Plaintiffs set forth the following allegations in their Complaint: As a result of an IRS field audit for tax year 1994, the IRS assessed a levy against them in the amount of $7,177.00. Plaintiffs allege that although they made payments on the levy, the IRS applied $3,973 of their 1995 tax refund to the remaining balance on their tax liability, which was the balance due for tax year 1994. Plaintiffs allege that on March 1, 1999, they learned that $2,500.00 of the $7,177.00 levy was in error. Plaintiffs claim that the basis for the error was a mistake made on Form 1099R for tax year 1993. Plaintiffs allege that they contacted the IRS on both April 1, 1999 and May 1, 1999 in order to determine how to file for a partial return of the levy. Plaintiffs allege that the IRS did not give them a clear answer and they were never informed of the applicable statute of limitations. Plaintiffs further allege that on June 1, 1999, they were advised to file form 1040X but were not advised of the statute of limitations. Plaintiffs filed form 1040X with the IRS on July 12, 1999. On September 12, 1999, the IRS informed Plaintiffs that the claim was disallowed due to the statute of limitations.
II. Discussion
A. Standard of Review
Defendant brings a motion to dismiss for lack of subject matter jurisdiction because plaintiffs did not file this suit within the applicable statute of limitations. Rule 12(b)(1) permits a party to seek dismissal of an action for lack of subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). The court shall dismiss the action "[w]herever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter." Fed.R.Civ.P. 12(h)(3). The plaintiff bears the burden of establishing the existence of subject matter jurisdiction. See Stock West, Inc. v. Confederated Tribes of Colville Reservation, 873 F.2d 1221, 1225 (9th Cir. 1989); McNutt v. General Motors Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936). Initially, there is a presumption of a lack of jurisdiction until the plaintiff affirmatively proves otherwise. Stock West, 873 F.2d at 1225. In adjudicating a 12(b)(1) motion, a Court is not limited to the pleadings, and may properly consider extrinsic evidence. See Farr v. United States, 990 F.2d 451, 454 (9th Cir.), cert. denied 510 U.S. 1023 (1993); McCarthy v. United States, 8650 F.2d 558, 560 (9th Cir. 1988),cert. denied, 489 U.S. 1052 (1989).
Plaintiffs seek a refund for the overpayment of tax. Such suits are governed by the time periods set forth in 26 U.S.C. § 6511 (a). Section 6511(a) provides, in relevant part, as follows:
Claim for credit or refund of an overpayment of any tax imposed by this title in respect of which tax the taxpayer is required to file a return shall be filed by the taxpayer within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever of such periods expires the later, or if no return was filed by the taxpayer, within 2 years from the time the tax was paid.
Section 6511(b)(1) further provides that "[n]o 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." Filing of a timely claim is a jurisdictional prerequisite to an action for recovery of taxes paid. See Miller v. United States, 38 F.3d 473, 474 (9th Cir. 1994).
B. Analysis
Plaintiffs filed their original 1994 Form 1040 on May 4, 1995. After performing an audit of the plaintiffs' Form 1040 for tax year 1994, the IRS assessed a deficiency in the amount of $5,259.00 and a penalty in the amount of $1,122.60. On May 19, 1997, plaintiffs fully paid their 1994 federal tax liability. On July 19, 1999, plaintiffs filed a Form 1040X seeking a refund of $2,500.00. Pursuant to 26 U.S.C. § 6511 (a), plaintiffs were required to file their claim for refund by the latter of May 4, 1998, three years from the date they filed their original 1994 Form 1040, or May 19, 1999, two years from the date they fully paid their 1994 tax liability. Plaintiffs first filed their claim for a refund in July, 1999, two months after the last acceptable date of May 19, 1999. No claim for a refund can made unless a claim is filed by the taxpayer within the time limitations set forth in 26 U.S.C. § 6511 (a). See 26 U.S.C. § 6511 (b)(1).
The following facts are taken from the Declaration of Jeremy N. Hendon submitted with the Government's motion. Attached to Hendon's Declaration are (1) a copy of plaintiffs' Form 1040 for tax year 1994; (2) a copy of Form 4340 — Certificate of Assessments, Payments, and Other Specified Matters for plaintiffs; (3) a copy of Form 1040X for tax year 1994; and (4) a copy of the Notice of Claim Disallowance dated September 21, 1999, sent by the IRS to plaintiffs. As noted above, it is proper for the Court to consider material submitted outside the pleadings in order to assure itself that it has jurisdiction. See McCarthy v. United States, 850 F.2d at 560. Plaintiffs do not dispute these facts in their opposition to the motion to dismiss.
Plaintiffs argue that their case should not be dismissed because they filed an informal claim for refund within the applicable statute of limitations and that informal claim tolled the statute of limitations until they filed their formal claim. Plaintiffs allege that the informal claim for refund was lodged when Ms. Troxel contacted the IRS on April 1, 1999. Ms. Troxel states that the IRS did not inform her about what she needed to do to file for a refund or about the applicable statute of limitations. Plaintiffs' rely on United States v. Kales, 314 U.S. 186 (1941). While Kales does provide that an informal refund claim can be valid, such claim must have a written component. See Yuen v. United States, 825 F.2d 244, 245 (9th Cir. 1987). Thus, Plaintiffs oral informal claim for a refund is insufficient to meet the statutory requirements.
Plaintiffs also argue that the statute of limitations should be tolled for equitable reasons because the IRS did not tell them about the statute of limitations in their April and May, 1999 telephone conversations. InUnited States v. Brockamp, 519 U.S. 347, 354 (1997), the Supreme Court held that the doctrine of equitable tolling does not apply to the limitations periods set forth in 26 U.S.C. § 6511. Plaintiffs attempt to distinguish Brockamp, arguing that the incorrect tax assessment and the incomplete advice they received was affirmative action by the government which prevented them from meeting the correct filing deadline. Plaintiffs argue that the government should not be able to profit by its own misconduct or negligence. In deciding Brockamp, the Supreme Court stated "[t]o read an "equitable tolling' exception into § 6511 could create serious administrative problems by forcing the IRS to respond to, and perhaps litigate, large numbers of late claims, accompanied by requests for `equitable tolling' which, upon close inspection, might turn out to lack sufficient equitable justification."Brockamp, 519 U.S. at 354 "The nature and potential magnitude of the administrative problem suggest that Congress decided to pay the price of occasional unfairness in individual cases (penalizing a taxpayer whose claim is unavoidably delayed) in order to maintain a more workable tax enforcement system." Id. Congress did not carve out an exception to the rule of no equitable tolling of § 6511 for situations involving incorrect advice from government employees. Consequently, the Court concludes that the statute of limitations cannot be tolled for the equitable reasons alleged by Plaintiffs.
Plaintiffs also argue that government should be equitably estopped from asserting the statue of limitations defense based on the actions of the IRS employees. "In general, estoppel may be invoked only where a misrepresentation by one party is reasonably relied upon by a second party, who suffers detriment as a result." Purcell v. U.S., 1 F.3d 932, 939 (9th Cir. 1993). However, "the Government may not be estopped on the same terms as any other litigant." United States v. Hatcher, 922 F.2d 1402, 1410 (9th Cir. 1991) (quoting Heckler v. Community Health Servs., 467 U.S. 51, 60 (1984)). Before the government may be estopped, the aggrieved party must demonstrate "affirmative conduct going beyond mere negligence," and must also show "that the government's act will cause a serious injustice and the imposition of estoppel will not unduly harm the public interest ." S M Investment Co. v. Tahoe Regional Planning Agency, 911 F.2d 324, 329 (9th Cir. 1990) (citing Watkins v. United States Army, 875 F.2d 699, 707 (9th Cir. 1989) (en banc), cert. denied, 498 U.S. 1087 (1991). The Ninth Circuit applies this "two-prong test — as a threshold matter before deciding whether the `traditional elements' of estoppel are present." Hatcher, 922 F.2d at 1410 (citingWatkins 875 F.2d at 707).
Plaintiffs have failed to allege affirmative conduct beyond mere negligence of the IRS agents with whom Ms. Troxel spoke on April 1, 1999 and May 1, 1999. Plaintiffs do not allege affirmative misrepresentations or false promises made by IRS employees. Rather, Plaintiffs allege that the IRS agents failed to inform them of the proper procedure and applicable statute of limitations. Even assuming the IRS agents gave Ms. Troxel incorrect advice, "a single oral misstatement by a government employee will ordinarily not constitute affirmative misconduct." S M Investment, 911 F.2d at 329. In addition, when dealing with the government, "an individual is charged with knowing government statutes and regulation and assumes the risk `that government agents may exceed their authority and provide misinformation.'" Id. (quoting Lavin v. Marsh, 644 F.2d 1378, 1383 (9th Cir. 1981)); see also Wagner v. Director. Fed. Emergency Mgmt. Agency, 847 F.2d 515, 519 (9th Cir. 1988). The Court concludes that Plaintiffs have failed to meet the threshold requirements for invoking estoppel in this case.
III. Conclusion
Plaintiffs have failed to establish subject matter jurisdiction in this case. Plaintiffs filed their claim for relief after the applicable time limitations had run. Consequently, this Court lacks jurisdiction over the case. The Court GRANTS Defendant's Motion to Dismiss the Complaint.
IT IS SO ORDERED.