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Parties Involved:
Yadira Sandoval
Appellant
Armando Sandoval Lua
Appellant
United States
Appellee

Document Text:

United States Court of Appeals 

for the Federal Circuit ______________________ 

ARMANDO SANDOVAL LUA, YADIRA SANDOVAL,

Plaintiffs-Appellants

v.

UNITED STATES,

Defendant-Appellee

______________________ 

2016-1313

______________________ 

Appeal from the United States Court of Federal 

Claims in No. 1:13-cv-00095-CFL, Judge Charles F. 

Lettow. 

______________________ 

Decided: December 15, 2016

______________________ 

SEAN H. COLON, Sean H. Colon, Inc., Woodland, CA, 

argued for plaintiffs-appellants.

REGINA S. MORIARTY, Tax Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by RICHARD FARBER,

CAROLINE D. CIRAOLO. 

______________________ 

Before PROST, Chief Judge, WALLACH and CHEN, Circuit 

Judges.

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2 SANDOVAL LUA v. UNITED STATES

WALLACH, Circuit Judge. 

Armando Sandoval Lua and Yadira Sandoval (together, “the Sandovals”) appeal from the decision of the U.S. 

Court of Federal Claims (“Claims Court”) granting summary judgment in favor of the United States (“Government”) as to certain tax refunds claimed by the 

Sandovals. See Sandoval Lua v. United States, 123 Fed. 

Cl. 269, 277 (2015). We affirm. 

BACKGROUND

In 2006, the U.S. Internal Revenue Service (“IRS”)

opened an audit of the Sandovals’ tax return for the 2004

fiscal year. Appellee’s Suppl. App. (“SA”) 3. The IRS later 

expanded this audit to include the 2003 and 2005 fiscal 

years.1 SA 44. The Sandovals met with an IRS agent 

several times and went over the proposed adjustments to 

the Sandovals’ taxable income and, thus, outstanding tax 

liability owed, for the 2003 and 2004 fiscal years. SA 

44−47. During this process, the Sandovals signed two key 

documents; in Form 4549, they waived their right to a 

notice of deficiency for the years 2003 and 2004, and in 

Form 872, they consented to extend the statute of limitations period for the 2003 fiscal year through December 31, 

2008. SA 34, 36–37. The Sandovals hired representation 

and obtained audit reconsideration. SA 42, 46. 

On reconsideration, the IRS assessed deficiencies for 

the 2003 and 2004 fiscal years in the amounts of $60,274 

and $87,566, respectively. SA 3, 9. IRS agents thereafter 

continued to meet and confer with the Sandovals’ representative in the following months to prepare amended 

returns for 2003 and 2004. SA 46–47. 

 

1 Deficiencies for the 2005 fiscal year were assessed 

and later disputed and resolved in the U.S. Tax Court. 

See Sandoval Lua v. Comm’r, T.C.M. (CCH) 2011-192 

(2011).

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SANDOVAL LUA v. UNITED STATES 3

The Sandovals filed amended tax returns in June 

2008 for the amounts owed that they considered to be 

“substantially correct,” and requested abatements that 

roughly totaled the outstanding amounts assessed but not 

paid. SA 58, 59−77 (2003 amended tax return), 78–95 

(2004 amended tax return); see also SA 156 at 58:6−7

(deposition of Ms. Sandoval in which she states that they 

sent checks to the IRS that were “an estimate of―only of 

the money that we owed”). The returns included two 

checks and an accompanying letter from their representative stating that the checks were to be applied to the 

Sandovals’ income tax liability for 2003 and 2004, and 

that “any overpayment” should be contributed to other 

years’ outstanding amounts due. SA 58. The IRS granted 

a substantial portion of the requested abatements, such

that these checks and overpayment credits satisfied the 

Sandovals’ tax deficiencies in full from 2003 and 2004.2 

SA 4, 10.

In 2010, the Sandovals filed a second set of amended 

returns for 2003 and 2004 seeking a full refund of funds 

remitted plus amounts applied as overpayments from 

other tax years, totaling approximately $101,000. Appellants’ Suppl. App. 27−69. The IRS denied the claims for 

refund and denied appeal in 2012. SA 140−49, 151–52. 

The Sandovals filed suit in the Claims Court seeking 

the same relief. The Sandovals contended that they were 

entitled to the remitted funds on any of the following 

grounds: (1) they withdrew consent to assessment without notice of deficiency and never received subsequent 

 

2 The IRS applied overpayment credits of $4,390 

and $1,800 to the 2003 tax year, and $1,900.37 and 

$718.19 to the 2004 tax year. SA 3−4, 10. By the time 

the IRS granted the abatements, the Sandovals had 

overpaid their tax liabilities for 2003 and 2004. The IRS 

later issued a refund of $1,123.67 to the Sandovals. SA 5.

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4 SANDOVAL LUA v. UNITED STATES

notice; (2) the 2008 funds were applied after the three 

year statute of limitations for assessment had expired; or 

(3) the 2008 funds were given as refundable deposits 

rather than as tax payments. The Claims Court granted 

summary judgment in favor of the Government and 

denied a cross-motion for summary judgment, finding 

that as a matter of law the Sandovals were not entitled to 

the claimed refunds. Sandoval Lua, 123 Fed. Cl. at 277. 

The Sandovals subsequently filed this appeal. This 

court has jurisdiction pursuant to 28 U.S.C. § 1295(a)(3) 

(2012).

DISCUSSION

This court “review[s] the Claims Court’s grant of 

summary judgment de novo.” Amergen Energy Co. v. 

United States, 779 F.3d 1368, 1372 (Fed. Cir. 2015). 

Summary judgment is appropriate if there is no genuine 

dispute as to any material fact and the moving party is 

entitled to a judgment as a matter of law. See Fed. R. Civ. 

P. 56(a); Consol. Edison Co. v. Richardson, 232 F.3d 1380, 

1383 (Fed. Cir. 2000). “We view the evidence in a light 

most favorable to the non-movant . . . and draw all reasonable inferences in its favor.” SunTiger, Inc. v. Sci. 

Research Funding Grp., 189 F.3d 1327, 1334 (Fed. Cir. 

1999).

I. The Claims Court Properly Granted Summary Judgment to the Government

A. Appellants Consented to Assessment Without Notice of 

Deficiency

The Sandovals primarily argue that the 2003 and 

2004 assessed deficiencies are invalid because they “impliedly or constructively” withdrew their consent to waive 

the required notice of deficiency before the assessment, 

and the Government then failed to attach a notice within 

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SANDOVAL LUA v. UNITED STATES 5

the statute of limitations period.3 Appellants’ Br. 43. The 

Government counters that this is a case in which the 

Sandovals “effectively admitted they had not reported all 

of their income on their original returns for 2003 and 

2004, [and now believe that] they are entitled to a refund 

of the additional taxes that they reported on the amended 

returns and remitted to the IRS in June 2008.” Appellee’s 

Br. 25. We agree with the Government.

The IRS generally may not assess or collect income 

taxes until it issues a notice of deficiency. See I.R.C.

§§ 6212(a), 6213(a) (2012). Nevertheless, a taxpayer may 

waive the right to a notice of deficiency by signing a 

waiver and filing it with the IRS at any time. Id.

§ 6213(d). “A duly executed IRS Form 4549 is a proper 

waiver of the deficiency notice requirements.” Perez v. 

United States, 312 F.3d 191, 197 n.23 (5th Cir. 2002)

(citation omitted); see Robert E. McKenzie, 1 Representation Before the Collection Division of the IRS § 3:148 

(Thomson Reuters ed., 2016). A taxpayer may withdraw 

the waiver and opt for the requirement of a notice of 

deficiency accompanying an assessment at any time until 

“such waiver has been acted upon by the district director 

and the assessment has been made in accordance with its 

terms . . . .” Treas. Reg. § 301.6213-1(d) (2016). 

The Sandovals claim that their request for audit reconsideration in the form of a letter and a phone call in 

early-November 2007 impliedly or constructively withdrew their Form 4549 waiver.4 Appellants’ Br. 37. In 

 

3 The Sandovals also characterize their withdrawal 

of Form 4549 as “express[]” in one instance. Appellants’ 

Br. 21.

4 More specifically, the Sandovals argue that they 

believed that the case had been “closed” (i.e., “assessed”), 

such that withdrawal was no longer available on November 1, 2007 and, thus, they requested the only available 

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6 SANDOVAL LUA v. UNITED STATES

fact, there is no mention of withdrawal or waiver in either 

the letter or the Sandovals’ description of the phone call to 

the IRS. SA 46, 52. The Sandovals have presented no

legal authority that audit reconsideration is indicative of 

or synonymous with waiver withdrawal. They have 

offered no authority to suggest that courts have entertained a theory of constructive or implied withdrawal. 

Without proof of withdrawal of the waiver, the IRS 

properly denied the Sandovals’ refund request as a matter 

of law. 

The Sandovals further argue that the Government 

conceded the issue of withdrawal at a status conference 

held in April 2014. Appellants’ Br. 37. The Claims Court 

succinctly stated that it “ha[d] never understood 

[G]overnment’s counsel to have waived this issue.” Sandoval Lua, 123 Fed. Cl. at 274 (citation omitted). 

We agree with the Claims Court that the record does 

not support the Sandovals’ argument and that there is no 

genuine dispute about this material fact. See SunTiger, 

Inc., 189 F.3d at 1334 (explaining that no genuine dispute 

as to a material fact exists if no record evidence supports 

the nonmoving party’s argument). At no point did the 

Government concede that the Sandovals withdrew their 

 

option of reconsideration. Appellants’ Br. 13−14. Because 

the case was not officially closed until November 26, 2007, 

the Sandovals also argue that the Government should 

have understood the reconsideration request to serve as a 

proxy for the withdrawal of Form 4549. Id. at 25, 36−37. 

They further claim that, without official closure of the 

case, “there was no support for audit reconsideration.” Id.

at 27. However, the procedures for requesting audit 

reconsideration are not material to this case; we have no 

evidence to indicate that audit reconsideration is equivalent to waiver withdrawal.

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SANDOVAL LUA v. UNITED STATES 7

consent. We do not find that the Government conceded to 

a withdrawal of the waiver of notice of deficiency here.

B. The 2004 Assessment Limitations Period Had Not 

Expired

The Sandovals next argue that their June 2008 remittance for the 2004 year was not timely because it did not 

fall within three years of the return filing. Appellants’ Br. 

45. Because the remittance was not timely, the Sandovals argue that they should be refunded that amount 

remitted. Id. We agree with the Claims Court’s finding 

that there is no genuine dispute of material fact on this 

issue. Sandoval Lua, 123 Fed. Cl. at 276. 

As a general rule, all taxes “shall be assessed within 3 

years after the return was filed . . . .” I.R.C. § 6501(a). If 

a taxpayer “omits from gross income an amount properly 

includible therein” and “such amount is in excess of 25 

percent of the amount of gross income stated in the return,” the assessment and collection period is extended to 

six years. Id. § 6501(e)(1)(A)(i).

The Sandovals paid a remittance in June 2008, SA 58, 

and they do not dispute that their amended returns of 

$138,032 for fiscal year 2003 and $183,862 for fiscal year 

2004 are substantially more than 25% of their originally 

reported returns of $52,023 and $51,848, respectively, SA 

14, 24 (adjusted gross incomes originally reported), 59, 78 

(adjusted gross incomes as amended). The Sandovals also 

have offered no evidence to suggest that I.R.C.

§ 6501(e)(1)(A)(ii), which contains an exception for 

amounts omitted from gross income that were nevertheless adequately disclosed, would apply. Accordingly, the 

applicable statute of limitations for the 2004 tax year

assessment expired in April 2011, i.e, six years from the 

date the Sandovals filed their original tax return, and the 

Sandovals’ payments in June 2008 were timely. 

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C. The 2008 Remittances Were Appropriately Considered 

as Tax Payments 

The Sandovals further argue that the IRS improperly 

designated the 2008 remittances as payments, rather 

than deposits. Appellants’ Br. 41–42. Internal Revenue 

Code § 6603(a) provides that a “taxpayer may make a 

cash deposit with the [IRS] which may be used by the 

[IRS] to pay any tax . . . which has not been assessed at 

the time of deposit. Such a deposit shall be made in such 

a manner as the [IRS] shall prescribe.” The IRS’s Revenue Procedure explains that a deposit shall be accompanied with a “written statement” designating the deposit 

as such, and that any undesignated remittance “will be 

treated as a payment and applied by the [IRS] against 

any outstanding liability for taxes, penalties[,] or interest.” Rev. Proc. 2005-18, 2005-13 I.R.B. 798 § 4.01(1)–(2) 

(2005). 

Prior to the adoption of the statutory definition of 

“deposit” in 2004,5 courts used a test of “circumstances” to 

determine whether remittances were deposits or payments. In New York Life Insurance Co. v. United States, 

we adopted the circumstances test and found that, when 

the party reserved the right to seek return of the remittance, a remittance made under protest following a notice 

of deficiency was a deposit as a matter of law upon the 

IRS’s failure to assess the deficiency within the statute of 

limitations. 118 F.3d 1553, 1559–60 (Fed. Cir. 1997). 

The Sandovals argue that the Government is equitably estopped from applying Revenue Procedure 2005-18 

and that the New York Life circumstances test should be 

used instead. Appellants’ Br. 41. According to Appellants, equitable estoppel applies because the Government 

 

5 See The American Jobs Creation Act of 2004, Pub. 

L. No. 108-357, § 842, 118 Stat. 1418, 1598−1600.

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SANDOVAL LUA v. UNITED STATES 9

“consistently and vehemently argued” that its November 

2007 assessments were correct, which induced Appellants

to remit funds they claim were not owed. Id. The Sandovals further argue that the 2008 remittances constitute 

“deposits” under the New York Life circumstances test. 

Id. at 40.

We find both of the Sandovals’ arguments unavailing. 

Appellants must show “affirmative misconduct [as] a 

prerequisite for invoking equitable estoppel against the 

[G]overnment . . . .” Zacharin v. United States, 213 F.3d 

1366, 1371 (Fed. Cir. 2000) (emphasis added) (citation 

omitted). The Sandovals have made no showing of misconduct in this case. 

We agree with the Claims Court that the Sandovals 

“offer no evidence that their 2008 remittance[s] complied 

with the terms of . . . Revenue Procedure [2005-18].” 

Sandoval Lua, 123 Fed. Cl. at 277. Because the funds 

were received after 2004, the New York Life circumstances test does not apply and I.R.C. § 6603 controls. The 

remittances accompanied amended tax returns with tax 

liabilities in excess of $96,000, which followed a November 2007 deficiency assessment. SA 58−59 (cover letter 

acknowledging amended tax liabilities for 2003 and 2004 

totaling $96,446.63). Their accompanying letter requested that the IRS apply the payments to outstanding tax 

liabilities for 2003 and 2004 fiscal years and any additional years with liability in the event of overpayment. 

SA 58. The letter did not designate the remittances as 

deposits, as Revenue Procedure 2005-18 requires. They 

were tax payments, not deposits. 

D. The Sandovals Waived Their Additional Arguments

The Sandovals contest the Claims Court’s rejection of 

two additional arguments that (1) satellite reimbursements (from Mr. Sandoval’s occupation as a satellite dish 

installer) cannot constitute “income” as defined by statute, Appellants’ Br. 41; and (2) the Form 4549 was signed 

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10 SANDOVAL LUA v. UNITED STATES

under duress, id. at 38–39. We agree with the Claims 

Court that the Sandovals waived these arguments under 

the substantial variance rule.

Internal Revenue Code § 7422(a) provides that, to 

bring suit against the United States for the recovery of 

income taxes, a taxpayer must have timely filed a refund 

claim in the manner prescribed by regulation. Treasury

Regulation § 301.6402-2(b)(1) specifies that refunds will 

only be granted on one or more of the grounds set forth in 

a timely-filed claim and that the claim “must set forth in 

detail each ground upon which a credit or a refund is 

claimed and facts sufficient to apprise the Commissioner 

of the exact basis thereof.” 

We have interpreted this statute and regulation as 

stating a “substantial variance” rule that bars taxpayers 

from bringing new claims or facts not alleged in the 

refund application to a court in which suit for refund is 

sought. See Cencast Servs., L.P. v. United States, 729 

F.3d 1352, 1366 (Fed. Cir. 2013); see also Lockheed Martin 

Corp. v. United States, 210 F.3d 1366, 1371 (Fed. Cir. 

2000) (explaining background and reasoning behind the 

“substantial variance” rule). For a theory, claim, or fact 

supporting the application for refund to be admissible in a 

suit, we ask “whether there [wa]s a substantial variance 

from a timely filed claim.” Computervision Corp. v. United States, 445 F.3d 1355, 1364 n.8 (Fed. Cir. 2006) (citation omitted). 

We agree with the Claims Court that, having failed to 

argue that the satellite reimbursements were not income 

or that they signed Form 4549 under duress in the initial 

refund application, the Sandovals’ introduction of these 

arguments would be a “substantial variance” from the 

initial claims. Sandoval Lua, 123 Fed. Cl. at 274 n.12. 

Therefore, these arguments were waived and were appropriately not considered.

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SANDOVAL LUA v. UNITED STATES 11

CONCLUSION

We have considered the Sandovals’ remaining arguments and find them unpersuasive. Accordingly, the 

decision of the U.S. Court of Federal Claims is 

AFFIRMED

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