Davis Ex Rel. Estate of Smith v. United States

Case: 12-60011 Document: 00511903461 Page: 1 Date Filed: 06/28/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
June 28, 2012
No. 12-60011 Lyle W. Cayce
Summary Calendar Clerk
W. E. DAVIS, as Administrator of the Estate of Anthony Walker Smith,
Deceased,
Plaintiff - Appellant
v.
UNITED STATES OF AMERICA,
Defendant - Appellee
Appeal from the United States District Court
for the Northern District of Mississippi
USDC No. 2:11-CV-34
Before BENAVIDES, STEWART, and HIGGINSON, Circuit Judges.
PER CURIAM:*
Before the Court is Plaintiff-Appellant W. E. Davis’s (“Davis”) appeal of
the district court’s dismissal, for lack of subject matter jurisdiction, of his action
for a refund of previously paid taxes on the estate of Anthony Walker Smith
(“Smith”). We AFFIRM.
**
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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FACTUAL AND PROCEDURAL BACKGROUND
The facts of this case are not in dispute. Davis is the administrator of the
estate of decedent Smith. On or about February 3, 2003, Davis, on behalf of
Smith’s estate, filed an income tax return reporting a tax liability of $491,521.
Included in that liability were taxes owed as the result of Smith’s ownership of
a fee simple interest in property described as Wyatt Farm. The estate completed
payment on the tax liability, plus interest and penalties, on April 17, 2003.
Prior to filing this tax return, however, Smith’s father, Raymond Smith,
filed suit in the Chancery Court of Tate County, Mississippi, against Smith’s
estate, seeking reformation of the deed conveying Smith’s interest in Wyatt
Farm. See Davis v. Smith, 922 So.2d 814, 817 (Miss. Ct. App. 2005) (noting suit
filed April 12, 2002). Raymond Smith argued that the deed contained a
scrivener’s error that omitted an intended reservation of a life estate on the
property for Raymond Smith. See id. On November 3, 2003, the Chancery Court
found a mutual mistake existed and reformed the deed to reserve a life estate for
Raymond Smith. Id. The estate appealed the decision to the Mississippi Court
of Appeals, which affirmed the Chancery Court on August 16, 2005. See id. at
814. On March 2, 2006, the Mississippi Supreme Court denied certiorari. See
Davis v. Smith, 927 So. 2d 750 (Miss. 2006).
Thereafter, on or about November 4, 2008, the estate filed an
administrative claim for a refund from the Internal Revenue Service (“IRS”),
asserting that the estate overpaid federal taxes by $215,323. The basis for the
refund claim was that the value of Smith’s interest in Wyatt Farm had been
overstated due to the estate’s mistaken understanding that Smith owned Wyatt
Farm in fee simple, unencumbered by a life estate. The overstatement resulted
in an overpayment of federal taxes.
On February 19, 2009, the IRS disallowed the estate’s refund claim on the
ground that it was not timely filed. The IRS cited the provisions of § 6511 of the
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Internal Revenue Code, which section requires that a claim for refund be filed
within three years from the filing of a tax return, or two years from the payment
of the tax, whichever is later. See 26 U.S.C. § 6511(a). As the estate’s refund
claim for the estate tax had been filed more than three years after the filing of
the tax return for that tax, and more than two-years after payment of the tax,
the IRS found the refund claim untimely.
Davis, on behalf of Smith’s estate, filed the instant tax refund suit in
federal district court on February 18, 2011. The United States of America (the
“Government”) filed a motion to dismiss for lack of subject-matter jurisdiction,
arguing that the failure to file a timely refund claim with the IRS divested the
district court of jurisdiction over the suit.1 On December 15, 2011, the district
court granted the Government’s motion and dismissed the suit. This timely
appealed followed.
STANDARD OF REVIEW
We review de novo the district court’s dismissal under Federal Rule of
Civil Procedure 12(b)(1) for lack of subject-matter jurisdiction. Lane v.
Halliburton, 529 F.3d 548, 557 (5th Cir. 2008). A court may find a lack of
subject-matter jurisdiction by evaluating one of three sets of submissions: “(1)
the complaint alone; (2) the complaint supplemented by undisputed facts
evidenced in the record; or (3) the complaint supplemented by undisputed facts
plus the court’s resolution of disputed facts.” Ramming v. United States, 281
F.3d 158, 161 (5th Cir. 2001) (citing Barrera-Montenegro v. United States, 74
F.3d 657, 659 (5th Cir. 1996)).
2
See 26 U.S.C. § 7422(a) (providing “[n]o suit . . . shall be maintained in any court for
the recovery of any internal revenue tax alleged to have been erroneously . . . assessed or
collected . . . until a claim for refund or credit has been duly filed with the Secretary, according
to the provisions of law in that regard”); Duffie v. United States, 600 F.3d 362, 384 (5th Cir.
2010) (“A taxpayer’s failure to file a timely refund claim with the IRS deprives the district
court of subject-matter jurisdiction.”).
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ANALYSIS
Davis argues that the district court erred in dismissing the instant suit for
lack of subject matter jurisdiction. Davis concedes that his administrative
refund claim was untimely under § 6511, and that an untimely claim divests the
court of jurisdiction. Nevertheless, Davis argues that the district court had the
authority to equitably toll the statute’s time-limits, and that he deserved such
tolling on the ground that the estate could not have known that the property
would be encumbered by a life estate until the Mississippi Supreme Court
denied certiorari on March 2, 2006. Davis argues the three-year time-limit in
§ 6511 should only have begun to run at that point, rendering his November 4,
2008 refund request timely.
Davis’s argument, however, is foreclosed by Supreme Court precedent.
Most recently, in United States v. Brockamp, 519 U.S. 347 (1997), the Supreme
Court held that courts could not “toll, for nonstatutory equitable reasons, the
statutory time (and related amount) limitations for filing tax refund claims set
forth in § 6511 of the Internal Revenue Code of 1986[.]” See id. at 348. Davis’s
appeals to Irwin v. Department of Veterans Affairs, 498 U.S. 89 (1990), and the
Court’s statement therein that the “same rebuttable presumption of equitable
tolling applicable to suits against private defendants should also apply to suits
against the United States,” see id. at 95–96, is unavailing. Brockamp squarely
confronted that presumption and found it rebutted by the language in § 6511
and other portions of the Tax Code, as well as the practical consequences of
“forcing the IRS to respond to, and perhaps litigate, large numbers of late
claims” when it already issued more than 90 million refunds a year. See 519
U.S. at 350–52.
Davis’s attempt to distinguish the justification for equitable tolling in
Brockamp from that in this case fares no better. In Brockamp, plaintiffs
consisted of mentally disabled individuals who, by reason of their disability,
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were unable to meet § 6511’s filing requirements. Id. at 348. Nonetheless,
Bockamp did not limit itself to equitable tolling resulting from disability, but
considered equitable tolling generally. See generally id. Indeed, the Supreme
Court, in earlier precedent, expressly rejected Davis’s argument that courts have
equitable power to ease § 6511’s time-constraints where the taxpayer was
ignorant of the basis of his refund claim prior to the time-limit’s expiration. See
United States v. Dalm, 494 U.S. 596, 610 n.7 (1990) (“That a taxpayer does not
learn until after the limitations period has run that a tax was paid in error, and
that he or she has a ground upon which to claim a refund, does not operate to lift
the statutory bar.”);1 see also Bull v. United States, 295 U.S. 247, 259, 260–261
(1935) (“The fact that the petitioner relied on the Commissioner’s assessment of
estate tax, and believed the inconsistent claim of deficiency of income tax was of
no force, cannot avail to toll the statute of limitations, which forbade the
bringing of any action in 1930 for refund of the estate tax payments made in
1921.”).2
Nor have the Supreme Court’s decisions been reversed by Congress’s
amendment to § 6511, in light of Brockamp, suspending § 6511’s time-limits
2
In Dalm, a taxpayer sought “equitable recoupment,” whereby she could be refunded
a previously paid gift tax. See id. at 598–99. The taxpayer sought the refund because the IRS
subsequently determined that the taxpayer should have paid income tax, which the taxpayer
so paid as part of a settlement. Id. The taxpayer sought the refund, however, after § 6511’s
time-limits had expired. Id. at 600. Regardless of the fact that the taxpayer could not have
known that her previous gift tax payment was erroneous until the IRS notified her of her
deficiency, the Supreme Court held that, “[u]nder the plain language of §§ 6511(a) and 7422(a),
the District Court was barred from entertaining her suit for a refund of the tax.” Id. at 602.
3
In Bull, the Supreme Court allowed the taxpayer to seek equitable recoupment of a
previously paid estate tax, but by means of a claim for a refund of a later-paid income tax,
where the estate tax was paid on the same transaction on which the income tax was levied.
Id. at 261–63. The Supreme Court reasoned that the statute of limitations did not bar suit for
a refund of the income tax, even if the basis of the refund was overpayment due to payment
of the previous estate tax. Id. Dalm distinguished Bull because, in Dalm, the taxpayer sought
refund of the earlier-paid tax, as her settlement foreclosed suit for refund of the later-paid tax.
See Dalm, 494 U.S. at 606.
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“during any period of such individual’s life that such individual is financially
disabled.” See Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. No. 105-206, § 3202, 112 Stat. 685 (codified at 26 U.S.C. § 6511(h)).3
First, this Circuit has found Brockamp’s general prohibition against equitable
tolling continues after Congress’s alteration to the code. See PALA, Inc. v.
United States, 234 F.3d 873, 880 (5th Cir. 2000) (“To the extent that PALA
argues for an equitable tolling of the statute of limitations, controlling Supreme
Court precedent refutes its position.” (citing Brockamp)); see also Doe v. KPMG,
LLP, 398 F.3d 686, 689 (5th Cir. 2005) (relying on Brockamp to hold court could
not toll tax code’s provisions limiting time for IRS to assess taxes). Second, the
concerns expressed in Brockamp continue and, indeed, have been enhanced by
Congress’s amendment. The amendment did not change tax code’s strict
language limiting the time for refund requests, and did not affect the Supreme
Court’s concern that equitable tolling conflicts with § 6511’s numerous time-
limits; indeed, Congress has simply added one more. See Brockamp, 519 U.S. at351–52 (noting “§ 6511 sets forth explicit exceptions to its basic time limits, and
those very specific exceptions do not include ‘equitable tolling’”).4 Third, despite
the fact that “deductions from congressional inaction are notoriously unreliable,”
Perez v. United States, 167 F.3d 913, 917 (5th Cir. 1999), the fact that Congress
decided to toll § 6511’s limits for “financial disability,” but not for ignorance,
despite clear Supreme Court authority prohibiting tolling for that purpose, is
further evidence that Brockamp’s reading is correct. See KPMG, 398 F.3d at 689(“Congress’s decision to specify further exceptions to the statute of
4
Davis does not argue that the amendment applies in this case.
5
This concern is magnified here, as Davis seeks to toll § 6511’s three-year time limit,
but not the section’s two-year time limit, presumably because the latter would not provide
Davis a sufficient amount of time from the point at which he proposes to start the clock.
Davis provides no argument, however, why the three-year limit would be the appropriate
timing-provision to toll.
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limitations—without adding a general equitable tolling provision—further
justifies the Supreme Court’s reading of the statute in Brockamp.”) Accordingly,
we find Brockamp controlling and hold that the district court did not err in
refusing to toll § 6511’s time-limits.
Davis nevertheless argues that, so read, § 6511 violates his rights to due
process under the Fifth Amendment because it bars his access to a forum in
which to litigate his meritorious claim. Statutes of limitations necessarily have
this effect, however, and they have long been upheld as constitutional. See
Atchafalaya Land Co. v. F.B. Williams Cypress Co., 258 U.S. 190, 197 (1922)
(upholding statute of limitations against due process challenge); see also Soriano
v. United States, 352 U.S. 270, 273–77 (1957) (upholding statute of limitations
for suits against United States; refusing to equitably toll statute for war).
Further, Davis had an opportunity to litigate the estate’s claim. Even prior to
filing the estate’s tax return, Smith’s father filed suit alleging Smith’s interest
in the property was encumbered by a life estate. Moreover, prior to the running
of § 6511’s time-limits, the Chancery Court ruled in favor of Smith’s father and
encumbered Smith’s interest with a life estate and the Mississippi Court of
Appeals upheld that decision. Although the Mississippi Supreme Court had not
yet denied certiorari, Davis could have filed a protective claim with the IRS to
preserve the estate’s interest in the refund. See I.R.S. Revenue Procedure 2002-
52 (providing procedure to file protective claim); PALA, Inc., 234 F.3d at 880(noting “PALA could have filed a protective claim for a refund as early as 1994,”
prior to expiration of time-limits, to preserve claim); Swietlik v. United States,
779 F.2d 1306, 1307 (7th Cir. 1985) (“If a claim for refund is contingent or
uncertain in amount or, as here, both, the proper procedure is to file a
conditional claim before the statute of limitations runs out; if you fail to do that
the statute of limitations will bar the refund.”). Accordingly, we find Davis’s due
process claim to be without merit.
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CONCLUSION
For the reasons stated above, the order of the district court is AFFIRMED.
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