Willis v. U.S.

Full title: RITA COLLEEN WILLIS, Personal Representative of the Estate of Arthur R…

Court: United States District Court, W.D. Washington, at Seattle

Date published: Jan 14, 2003

NO. C02-1784Z (W.D. Wash. Jan. 14, 2003)

Opinion

NO. C02-1784Z

January 14, 2003

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS

THOMAS S. ZILLY, United States District Judge

I. BACKGROUND

The facts in this case appear to be undisputed. Arthur R. Tosh died testate on November 5, 1993. Two wills were filed, together with a trust document, in a probate court of the King County Superior Court. The costs of administration were determined by the King County Superior Court but were not established until the Washington State Court of Appeals affirmed the judgment on March 1, 1999. The final judgment reduced the value of the estate below the $600,000 exemption level, and therefore, no estate tax was due the United States.

On August 10, 1994, while the valuation of the estate was pending in the probate court, the attorney for the estate filed an estate tax return ("Form 706") with the internal Revenue Service ("TRS"). The attorney filed the Form 706 in order to comply with IRS regulations even though it was unknown whether the estate, based on its valuation, would be subject to payment of taxes. The Form 706 reported a taxable estate of $835,308.31 and a net estate tax of $67,385.08, payment of which accompanied the Form 706. The Form 706, however, included a mathematical error that resulted in a $1,181.80 deficiency. On March 2, 1995, $1,245.87 was paid towards the outstanding deficiency and interest, and on October 11, 1995, a further $32.70 payment was made, which fully paid the deficiency and interest. These later two payments were made by Norma and Kenneth Schmidt. Although Norma Schmidt was serving as Special Administratrix, she was not authorized, without an Order of the Probate Court, to pay taxes on behalf of the estate. Until August 17, 2000, the attorney for the estate was not aware of the payments made by Norma and Kenneth Schmidt.

After it was established by the Washington State Court of Appeals on March 1, 1999, that the value of the estate was $505,676.00, an amended Form 706 was filed on August 17, 2000. This amended Form 706 Constituted an administrative refund claim for the $67,385.08 paid with the original Form 706 and for the $1,245.87 and $32.70 paid by Norma and Kenneth Schmidt. That claim was subsequently denied by the IRS Appeals Office on June 5, 2001.

The plaintiff now seeks a judgment compelling the IRS to return those funds paid by the estate. The defendant has moved to dismiss plaintiff's claim for lack of subject matter jurisdiction. See Fed.R.Civ.P. 12(b)(1).

1. Discussion

a. Standard for Motion to Dismiss

Because the defendant's challenge contests jurisdiction solely on the allecations of the complaint, the plaintiff's version of the jurisdictionally-significant facts are presumed to be true, and the motion to dismiss is granted only if the plaintiff has failed to allege an element necessary for subject matter jurisdiction. See Thornhill Pub. v. Gen'l Tel. Elecs., 594 F.2d 730, 733 (9th Cir. 1979).

b. Timely Filing of an Administrative Refund Claim

Where the plaintiff brings a suit for a refund of taxes paid, timely filing of an administrative refund claim is an element necessary for subject matter jurisdiction in this court. See 26 U.S.C. § 7422(a) ("no suit [for refund] . . . shall be maintained in any court . . . until a claim for refund or credit has been duly filed with the Secretary [of the Treasury], according to the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof");Commissioner v. Lundy, 516 U.S. 235, 240 (1996) ("Unlike the provisions governing refund snits in United States District Court which make timely filing of a refund claim a jurisdictional prerequisite to bringing suit . . ."); United States v. Dalm, 494 U.S. 596, 602 1990) ("unless a claim for refund of a tax has been filed within the time limits imposed by § 6511(a), a suit for refund . . . may not be maintained in any court"); Miller v. United States, 38 F.3d 473, 474 (9th Cir. 1994) ("A timely claim is a jurisdictional prerequisite to an action for recovery of taxes paid.").

Section 6311(a) of the Internal Revenue Code defines what constitutes timely riling of an administrative refund claim:

Claim for credit or refund of an overpayment of any tax imposed by this title in respect of what 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 tax-payer, within 2 years from the time the tax was paid.

26 U.S.C. § 6511(a). Furthermore, the statute states 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." 26 U.S.C. § 6511(b)(1).

The plaintiff failed to timely file an administrative refund claim. The plaintiff filed the original Form 706 on August 10, 1994 and the estate taxes were fully paid by October 11, 1995. In order to receive a refund, the plaintiff was required to file an administrative claim for refund by the later of three years from the date the original Form 706 was filed or two years from the date the estate tax was fully paid. See 26 U.S.C. § 6511(a). In order to qualify as timely, the refund must have been filed no later than October 10, 1997. See also Resp. at 2 ("The statute commenced to run when the interest and penalty payments demanded by the IRS . . . were made on . . . October 11, 1995."). The plaintiff failed to do this for the estate tax at issue. Instead, the plaintiff first. filed an administrative refund claim on August 17, 2000. Because the plaintiff did not timely file the administrative refund claim, this court lacks subject matter jurisdiction to this suit. See 26 U.S.C. § 6511(a), 7422(a); Lundy, 516 U.S. at 240; Dalm, 494 U.S. at 602.

c. Defenses Asserted by the Plaintiff

Although it would appear that this court is barred from hearing the suit, the plaintiff raises two factual circumstances that they believe warrant this court's attention. First, the plaintiff argues that the Special Administratrix's unauthorized payments of the estate's tax liability-after the authorized payment that accompanied the original Form 706-unfairly started the statute of limitation. Second, the plaintiff argues that because the value of the estate was not firmly known until the Washington State Court of Appeals affirmed the judgment of the Superior Court on March 1, 1999, and then until the State of Washington made a tax refund on September 5, 2000, it would be unfair to start the running of the statute of limitation on October 11, 1995. Both of these circumstances raise general principles of equity. Both must fail.

In United States v. Brockamp, 519 U.S. 347 (1997), the Supreme Court was presented with the question of whether courts could toll, for non-statutory equitable reasons, the statutory time limitations set forth in 26 U.S.C. § 6511. In this case, two taxpayers initially paid the IRS several thousand dollars that they did not owe. Id. at 348. In each case, the taxpayer filed an administrative claim for a refund several years after the relevant statutory period had ended. Id. In each case, the taxpayer alleged that the delay was not their fault and requested that the court extend the statutory time period for an "equitable" reason. Id. in both cases, the Ninth Circuit read § 6511 as if it did contain an implied exception that would permit "eguitable tolling." Id. at 348-49. The Supreme Court reversed, finding that an "equitable tolling" was not permitted. The Court found that:

Section 6511 sets forth its time limitations in unusually emphatic form. Ordinarily limitations statutes use fairly simple language, which one can often plausibly read as containing implied "equitable tolling' exception . . . But § 6511 uses language that is not simple. It sets forth its limitations in a highly detailed technical manner, that, linguistically speaking, cannot easily be read as containing implicit exceptions.

Id. at 350. In addition, the Court noted that § 6511 "sets forth explicit exceptions to its basic time limits, and those very specific exceptions do not include `equitable tolling.'" Id. at 351-52 (citing 26 U.S.C. § 6511(d)). Moreover, the Court found that:

Section 6511's detail, its technical language, the iteration of the limitations in both procedural and substantive forms, and the explicit listing of exceptions, taken together, indicate to us that Congress did not intend courts to read other unmentioned, open-ended, `equitable' exceptions into the statute that it wrote. There are no counter-indications. Tax law, after all, is not normally characterized by case-specific exceptions reflecting individualized equities.

Id. at 352; see also Dalm, 494 U.S. at 602 ("unless a claim for refund of a tax has been filed within the time limits imposed by § 6511(a), a suit for refund, regardless of whether the tax is alleged to have been "erroneously," "illegally," or "wrongfully collected," §§ 1346(a)(1), 7422(a), may not be maintained in any court").

Thus under Brockamp and Dalm, the plaintiff's equity-based defenses are without merit. Only those defenses specifically enumerated in 26 U.S.C. § 6511 can toll the statute of limitation. The plaintiff has not alleged, nor does it appear, that any of the statutory exceptions would apply in this matter.

2. Conclusion

Because the plaintiff failed to timely file an administrative refund claim, and because the plaintiff has failed to allege any relevant statutory exceptions that would apply in this matter, this court lacks subject matter jurisdiction to hear this suit. The court therefore GRANTS defendant's motion to dismiss [docket no. 6].