The opinion of the court was delivered by: Thelton E. Henderson, District Judge.
This matter came before the Court on Monday, June 4, 2001 on
Defendants' Motion to Dismiss, or in the alternative, Motion for Summary
Judgment and Plaintiff's Motion for Summary Judgment. After carefully
considering the written and oral arguments of counsel, the Court finds
that Defendant's Motion to Dismiss for lack of jurisdiction must be
GRANTED.
Plaintiff Charles I. McBride filed this action seeking a refund of
taxes, penalties and interest for his 1979 and 1981 federal income taxes
in the amount of $281,514.37. Plaintiff claims that the IRS illegally
assessed taxes in 1984, 1988 and 1996 after the statute of limitations
for each year had expired. The Government claims that Plaintiff failed to
file a claim for refund for taxes paid within two years of the dates of
payment in 1984 and 1988, and further failed to file a claim for refund
within six months after the adjustment in 1996. Therefore, the Government
claims that this Court lacks subject matter jurisdiction over this action
for failure to timely file the claim for refund pursuant to
26 U.S.C. § 7422.
Plaintiff timely filed his 1979 and 1981 individual tax returns. The
IRS assessed tax deficiencies against Plaintiff on February 20, 1984 for
1979 and 1981. Plaintiff paid in full in March of 1984. In June of 1988,
the IRS audited Plaintiff's 1979 and 1981 individual tax return and
determined that Plaintiff owed additional taxes. Instead of paying the
deficiency, the IRS and Plaintiff agreed to apply excess credits from his
1982 tax return to the 1979 and 1981 deficiency. (See Pl.'s Mot. Summ.
J., Partial Agreement, Ex. E.) The tax credit (Investments Tax Credits or
"ITC") originated from Plaintiff's interest as a limited partner in
Barrister Equipment Associates. The IRS carried back a portion of the tax
credit from 1982 to his 1979 tax liability, eliminating that liability.
The payments that Plaintiff originally made to satisfy the 1979 liability
plus interest were credited to another tax year. The IRS also carried back
a portion of the Plaintiff's unused 1982 ITC. to his 1981 tax liability,
which reduced his outstanding 1981 tax liability to $33,798. On October
24, 1988, the IRS assessed the remaining unpaid tax and interest for
1981. Plaintiff satisfied this liability in full by December of 1988.
When the IRS agreed to the ITC carrybacks, Plaintiff's partnership,
Barrister, was then under audit. Barrister was subject to the Tax
Treatment of Partnership Items Act of 1982, ("TEFRA") 26 U.S.C. § 6221,
et seq. By virtue of the nature of the partnership, Investment Tax
Credits and losses are passed through to individual partners. The IRS
completed its audit of the partnership in 1989 and disallowed the ITC
carrybacks from Plaintiff's partnership to his individual 1979 and 1981
tax returns. This result was litigated in Tax Court in 1995, which
affirmed the disallowance. Then in 1996, as a result of the
disallowance, the IRS assessed tax deficiencies, including interest and
penalties for 1979 and 1981 against Plaintiff in excess of $400,000.
Plaintiff filed an action in August of 1997 seeking to enjoin the IRS
from collecting on the alleged tax deficiencies. The U.S. District Court
granted the Government's motion to dismiss for lack of jurisdiction
finding Plaintiff's action barred by Anti-Injunction Act. The Ninth
Circuit affirmed. In July of 1998, Plaintiff filed this complaint for a
refund of tax, penalties and interest paid for taxes in 1979 and 1981.
Plaintiff alleges that these were wrongfully assessed after the statute
of limitations expired for 1979 and 1981. The Government contends that
Plaintiff did not timely file his claim for the refund to challenge the
assessments made in 1984, 1988, or 1996 and so this Court does not have
subject matter jurisdiction over this action.
A. Subject Matter Jurisdiction for 1984 and 1988 Assessments
The Government claims that this Court does not have subject matter
jurisdiction over this action because Plaintiff failed to timely file his
claims for refund. The Internal Revenue Code, 26 U.S.C. § 7422 (a),
provides:
No 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, or of any penalty claimed to have been
collected without authority, or of any sum alleged to
have been excessive or in any manner wrongfully
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.
Id. (emphasis added.)
The IRS assessed tax deficiencies against Plaintiff in February of 1984
and October of 1988. Plaintiff paid the amounts due in March of 1984 and
by December of 1988, respectively. The statute of limitations for filing
a claim for refund is two years from the time the tax was paid. Section
6511 of the Code provides:
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 ...