Llwellyn Green-Thapedi v. United States ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 08-1886
L LWELLYN G REENE-T HAPEDI,
Plaintiff-Appellant,
v.
U NITED S TATES OF A MERICA,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 03 C 3294—Ronald A. Guzmán, Judge.
S UBMITTED O CTOBER 8, 2008 Œ —D ECIDED D ECEMBER 3, 2008
Before R IPPLE, W OOD and T INDER, Circuit Judges.
R IPPLE, Circuit Judge. Llewellyn Greene-Thapedi brought
this action in the United States District Court for the
Northern District of Illinois. She sought a refund of an
Œ
After examining the briefs and the record, we have con-
cluded that oral argument is unnecessary. Thus, the appeal is
submitted on the briefs and the record. See Fed. R. App. P.
34(a)(2).
2 No. 08-1886
overpayment of income tax that she had paid for the 1999
taxable year, but which the IRS had applied to taxes
that she owed from the 1992 taxable year. The district
court determined that the Government properly assessed
the taxes, notified Ms. Greene-Thapedi of the 1992 tax
deficiency and issued Ms. Greene-Thapedi a refund check
for the remaining amount she was owed. It therefore
entered judgment in favor of the Government. We
vacate the judgment of the district court and remand the
case with instructions that the district court dismiss the
case for lack of subject matter jurisdiction.
I
BACKGROUND
A.
On April 30, 1996, Ms. Greene-Thapedi filed a tax return
for 1992 and reported a liability of $31,342, which was
$1,342 more than the estimated tax payment she had
previously made. The IRS challenged her reported liability.
It determined that she owed an additional $24,966 plus
penalties and sent Ms. Greene-Thapedi a notice of defi-
ciency on August 29, 1996.
Ms. Greene-Thapedi filed a petition in the United States
Tax Court for a redetermination of the taxes that she
owed for the 1992 taxable year. On June 5, 1997, the tax
court determined that she owed the Government $10,195.
On December 19, 1997, the IRS assessed the $10,195
deficiency, plus $4,319.53 in interest against Ms. Greene-
No. 08-1886 3
Thapedi. The IRS claims that it sent her a notice of defi-
ciency that day. Ms. Greene-Thapedi, however, main-
tains that she did not receive the notice.
On July 3, 2000, the IRS sent Ms. Greene-Thapedi a notice
of intent to levy assets. The notice stated that she owed
$23,805.53 in taxes, interest and penalties for the 1992
taxable year. Ms. Greene-Thapedi paid $10,195 for the
deficiency and $4,319.53 for the interest accrued through
December 19, 1997, but refused to pay any interest and
penalties from December 19, 1997 to July 3, 2000 on the
ground that she had not received the December 1997
deficiency notice.
B.
Ms. Greene-Thapedi also brought an action in the tax
court to recover a $10,663 overpayment of her 1999
federal income tax. In October 2002, while this action was
pending, the IRS applied the 1999 overpayment to her
disputed 1992 tax liability. See I.R.C. § 6402(a). This offset
not only eliminated Ms. Greene-Thapedi’s 1992 liability,
but also left a credit on her 1992 account.
In 2003, Ms. Greene-Thapedi filed this action in
district court to recover the 1999 overpayment. The
district court stayed its proceedings pending the outcome
of the tax court proceeding. In January 2006, the tax
court held that because of the offset, it no longer had
jurisdiction over the suit, and it concluded that her
claim was moot. The tax court held that, because the
application of the 1999 funds extinguished any remaining
4 No. 08-1886
liability for 1992, no further collection action could take
place. The tax court also held that it lacked jurisdiction
either to determine if the funds credited to her 1992
liability constituted an overpayment or to order a refund.
The Government consequently filed a motion to dismiss
the district court action. Because the 1999 overpayment
offset liability for 1992, the Government submitted,
Ms. Greene-Thapedi no longer had a claim for a refund
from the 1999 taxable year. It furthermore maintained
that Ms. Greene-Thapedi could not sue for a refund for
the overpayment until she exhausted her administrative
remedies by filing a refund claim with the IRS. The dis-
trict court denied the motion; it held that her tax court
petition constituted an informal claim for a refund.
Ms. Greene-Thapedi filed a second amended complaint
seeking a refund of $10,663, plus interest for the tax year
1992. The district court held that the IRS properly calcu-
lated the overpayment credit due to Ms. Greene-Thapedi,
$3,772.16, based on the 1992 liability and the 1999 overpay-
ment. In arriving at this figure, the district court found
that Ms. Greene-Thapedi did not present sufficient evi-
dence to rebut receipt of the December 1997 deficiency
notice, and thus she owed the IRS interest from 1997 to
2000.
The Government subsequently issued a check to Ms.
Greene-Thapedi for her overpayment, which she cashed.
Consequently, on February 14, 2008, the district court
found that no genuine issue of material fact remained and
entered judgment for the Government. Ms. Greene-
Thapedi now appeals.
No. 08-1886 5
II
DISCUSSION
Ms. Greene-Thapedi submits that the district court
erred in dismissing the case. She contends that a reasonable
fact-finder could determine that she did not receive the
December 1997 deficiency notice for the 1992 taxable
year, that the Government’s calculations of interest and
penalties were incorrect and that these factual issues
warranted further litigation in the district court.
We cannot address the merits of Ms. Greene-Thapedi’s
arguments because the district court lacked subject
matter jurisdiction to hear this case. Under section 7422(a)
of the Internal Revenue Code, a district court lacks juris-
diction over a refund claim that has not first been filed
with the IRS. United States v. Dalm, 494 U.S. 596, 602 (1990)
(holding, under section 7422(a), that the district court
lacked jurisdiction over a taxpayer’s refund claim
because the taxpayer failed to file a refund claim before
the statute of limitations had run); see also Bartley v. United
States, 123 F.3d 466, 468 (7th Cir. 1997) (“The Internal
Revenue Code authorizes suits for refund of taxes paid
to the federal government, but expressly and without
exception conditions the right to sue on the taxpayer
having first requested a refund from the Secretary of the
Treasury. . . .”). Under section 7422(d), when the IRS
applies an overpayment as a credit to a liability for a
separate tax year, the taxpayer must file a refund claim for
6 No. 08-1886
the year in which the IRS applied the credit.1 See
Kaffenberger v. United States, 314 F.3d 944, 959 (8th Cir.
2003); Republic Petroleum Corp. v. United States, 613 F.2d
518, 525 n.19 (5th Cir. 1980). After the IRS applied Ms.
Greene-Thapedi’s overpayment to the 1992 taxable year,
the case became a suit for a 1992 refund because it
centered on an adjudication of her remaining 1992 tax
liability. Ms. Greene-Thapedi recognized that the dispute
regarded the 1992 tax year. Although her original com-
plaint requested a refund for her 1999 overpayment, her
amended complaint requested a refund for the 1992
tax year. Indeed, in its motion to dismiss, the Govern-
ment noted that Ms. Greene-Thapedi needed to file an
administrative refund claim for 1992 before filing suit and
stated that the statute of limitations would expire in
October 2004. R.5 at 11. Ms. Greene-Thapedi, however,
never filed an administrative claim for the 1992 taxable
year.
The district court held that Ms. Greene-Thapedi’s
informal claim conferred it with subject matter jurisdic-
tion. However, her subsequent failure to file a formal
claim barred the court from exercising any jurisdiction
over the claim. See United States v. Kales, 314 U.S. 186, 194
(1941) (noting that, in applying tax regulations, the Court
“has often held that a notice fairly advising the [Internal
1
Section 7422(d) states: “The credit of an overpayment of any
tax in satisfaction of any tax liability shall, for the purpose of
any suit for refund of such tax liability so satisfied, be deemed
to be a payment in respect of such tax liability at the time
such credit is allowed.” 26 U.S.C. § 7422(d).
No. 08-1886 7
Revenue] Commissioner of the nature of the taxpayer’s
claim, which the Commissioner could reject because [it
was] 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 defects
and lack of specificity have been remedied by amend-
ment filed after the lapse of the statutory period”); PALA,
Inc. Employees Profit Sharing Plan & Trust Agreement v.
United States, 234 F.3d 873, 879 (5th Cir. 2000) (holding
that “courts will excuse ‘harmless noncompliance’ with
the formalities prescribed for refund claims,” provided
that the taxpayer corrects the formal deficiencies at a later
time). In previous cases that have applied the informal
claim doctrine, the taxpayers followed their informal
submissions with proper formal claims before initiating
litigation.2 Requiring compliance with the administrative
exhaustion requirement gives the Government a full
2
Kaffenberger v. United States, 314 F.3d 944, 954 (8th Cir. 2003)
(“Treasury regulations specify what is required of a taxpayer
to file a valid claim for refund or credit of taxes previously
paid. See 26 C.F.R. § 301.6402-2(b)(1); § 301.6402-3(a). Although
the regulation states that a claim that fails to comply with the
requirements will not be considered as a claim for refund,
§ 301.6402-2(b)(1), the Supreme Court has endorsed informal
claims filed within the statutory period that have technical
deficiencies, as long as a valid refund claim is subsequently
made after the period has run.”); United States v. Commercial
Nat’l Bank of Peoria, 874 F.2d 1165, 1175-76 (7th Cir. 1989)
(holding that the taxpayer met the claim requirement where
the taxpayer first filed a timely letter with the IRS that re-
quested a refund, and subsequently, filed a formal refund
claim).
8 No. 08-1886
opportunity to address the problem administratively.
BCS Fin. Corp. v. United States, 118 F.3d 522, 524-25 (7th Cir.
1997). The informal claim doctrine is predicated on the
expectation that any formal deficiency will at some
point be corrected. PALA, 234 F.3d at 879. To hold other-
wise would eliminate, as a practical matter, the formal
claim requirement. Because Ms. Greene-Thapedi failed
to perfect her administrative claim for a refund in the
tax year to which her initial refund was applied, the
district court lacked subject matter jurisdiction.
Conclusion
The district court lacked jurisdiction to hear Ms. Greene-
Thapedi’s action seeking a refund from her 1992 tax
liability. We therefore vacate the district court’s judg-
ment and remand the case to the district court with
instructions to dismiss the case.
V ACATED and R EMANDED with INSTRUCTIONS
12-3-08