Scott Gillespie v. United States

NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with Fed. R. App. P. 32.1
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted October 31, 2016*
Decided November 1, 2016
Before
ILANA DIAMOND ROVNER, Circuit Judge
ANN CLAIRE WILLIAMS, Circuit Judge
DAVID F. HAMILTON, Circuit Judge
No. 16-1465
SCOTT E. GILLESPIE and Appeal from the United States District
DEBRA J. GILLESPIE, Court for the Eastern District of Wisconsin.
Plaintiffs-Appellants,
No. 15-CV-0434
v.
Lynn Adelman,
UNITED STATES OF AMERICA Judge.
Defendant-Appellee.
ORDER
Scott and Debra Gillespie sued the United States for a refund of all federal
income taxes they paid for 2009, based on their position that they did not have taxable
earnings. The district court dismissed the action after concluding that the Gillespies had
not initially filed a claim for refund with the IRS, as required by 26 U.S.C. § 7422(a). The
Gillespies appeal this dismissal, and we affirm the judgment.
*We have unanimously agreed to decide the case without oral argument because
the briefs and record adequately present the facts and legal arguments, and oral
argument would not significantly aid the court. See FED. R. APP. P. 34(a)(2)(C).
No. 16-1465 Page 2
In April 2013 the Gillespies filed an amended return for the 2009 taxable year
“correcting” their taxable income from $82,499 to $0 and claiming a refund of all taxes
paid for that tax year. On their amended return the Gillespies wrote that they had
revised their earnings calculation to make it “conform to IRC Title 26 sec. 3401(a),
sec. 3121(a), sec. 3401(c), and sec. 3401(d)” (referring to the tax code’s definitions of
“wages,” “employee,” and “employer”). When the IRS did not process the amended
return or issue a refund, the couple commenced this action.
The government moved to dismiss, principally arguing that the Gillespies’
amended return did not constitute a claim for refund for purposes of § 7422(a), which
provides that
[n]o suit or proceeding shall be maintained in any court for the recovery of
any internal revenue tax alleged to have been erroneously or illegally
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,
and the regulations of the Secretary established in pursuance thereof.
Although a legitimate tax return can be a claim for refund, see 26 C.F.R.
§ 301.6402–3(a)(5), the government asserted that the Gillespies’ amended return was not
“an honest and genuine attempt to meet the requirements” of the tax code because it
rested on the frivolous assertion that wages are not taxable. This absence of a legitimate
claim for refund, the government argued, was a jurisdictional defect. Regardless, the
government added, the Gillespies’ lawsuit should be dismissed because their theory of
recovery is frivolous and they do not explain how any cited provision of the Internal
Revenue Code would entitle them to a refund.
The district court disagreed with the government’s position that § 7422(a)
imposes a jurisdictional requirement but did agree that dismissal was warranted
because the amended return was not a legitimate claim for refund. The amended return
did not satisfy § 7422(a), the court reasoned, because it “was not an honest and genuine
endeavor to satisfy the law.” Accordingly, the court dismissed the suit.
On appeal the Gillespies argue that the district court erred in concluding that
their amended return was invalid and did not satisfy § 7422(a). They contend that,
because they did not make an explicit tax-protestor argument in their amended return,
the court could not declare it to be frivolous or assume that it was not “an honest and
genuine endeavor.” The government counters, repeating its position in the district
court, that the Gillespies’ amended return was too frivolous to constitute a claim for
No. 16-1465 Page 3
refund and, for that reason, the court lacked subject-matter jurisdiction. And even if the
defect is not jurisdictional, the government continues, the court correctly concluded that
the Gillespies’ amended complaint failed to satisfy § 7422(a).
The Gillespies do not respond to the government’s renewed argument that
§ 7422(a) is jurisdictional, though we note that the Supreme Court’s most recent
discussion of § 7422(a) does not describe it in this manner, see United States v. Clintwood
Elkhorn Mining Co., 553 U.S. 1, 4–5, 11–12 (2008). And other recent decisions by the
Court construe similar prerequisites as claims-processing rules rather than jurisdictional
requirements, see, e.g., United States v. Kwai Fun Wong, 135 S. Ct. 1625, 1632–33 (2015)
(concluding that administrative exhaustion requirement of Federal Tort Claims Act is
not jurisdictional); Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 157 (2010) (concluding
that Copyright Act’s registration requirement is not jurisdictional); Arbaugh v. Y&H
Corp., 546 U.S. 500, 504 (2006) (concluding that statutory minimum of 50 workers for
employer to be subject to Title VII of Civil Rights Act of 1964 is not jurisdictional). These
developments may cast doubt on the line of cases suggesting that § 7422(a) is
jurisdictional. See, e.g., United States v. Dalm, 494 U.S. 596, 601–02 (1990); Greene-Thapedi
v. United States, 549 F.3d 530, 532–33 (7th Cir. 2008); Nick’s Cigarette City, Inc. v.
United States, 531 F.3d 516, 520–21 (7th Cir. 2008).
Regardless, the district court was correct that the Gillespies’ amended return was
frivolous and did not satisfy § 7422(a). As noted, a “properly executed” amended return
constitutes a claim for refund, see 26 C.F.R. § 301.6402–3(a)(5); Curry v. United States,
774 F.2d 852, 855 (7th Cir. 1985), but a return is not valid if it lacks “an honest and
reasonable intent to supply the information required by the tax code,” United States v.
Moore, 627 F.3d 830, 835 (7th Cir. 1980); see In re Payne, 431 F.3d 1055, 1057 (7th Cir.
2005). We have observed that in cases involving tax protestors “it is obvious that there
is no ‘honest and genuine’ attempt to meet the requirements of the code.” Moore, 627
F.3d at 835. A valid claim for refund also “must set forth in detail each ground upon
which a credit or refund is claimed and facts sufficient to apprise the Commissioner of
the exact basis thereof.” 26 C.F.R. § 301.6402–2(b)(1). The Gillespies’ assertion that the
definitions of “wages,” “employee,” and “employer” somehow entitled them to a
refund of all the taxes on some $82,000 in earnings is frivolous and does not meet these
requirements.
AFFIRMED.