Source: https://casetext.com/case/walter-v-us-3
Timestamp: 2019-11-15 06:34:49
Document Index: 511201925

Matched Legal Cases: ['§ 6511', '§ 6511', '§ 1346', '§ 1346', '§ 6511', '§ 6511', '§ 1346', '§ 6511', '§ 301', '§ 6511', '§ 6511', '§ 6511', '§ 6511', '§ 6511', '§ 1495', '§ 6511', '§ 6511', '§ 6511', '§ 6511', '§ 1346']

Walter v. U.S, Civil Action No. 09-420 | Casetext
Civil Action No. 09-420 (W.D. Pa. Dec. 16, 2009)
Walterv.U.S.
United States District Court, W.D. PennsylvaniaDec 16, 2009
"A tax return that claims a refund is considered a 'claim' for purposes of § 6511." Walter v. United States,…
The Magistrate Judge, however, correctly found that "where refund claims may technically be deficient by…
finding that substantial compliance with Rev. Proc. 99–21 was sufficient to establish tolling under § 6511(h)
Summary of this case from Estate of Kirsch v. United States
In Walter, a husband and wife seeking a refund in connection with their 2002 tax return filed a refund claim in 2007, more than four years after it was due.
Civil Action No. 09-420.
Except where otherwise indicated, these facts are stipulated to by the parties in their joint stipulation of undisputed facts (Docket No. 16).
In 2004, David Walter prepared a federal income tax return for the 2003 tax year that claimed credit for the refund that Plaintiffs had requested on the return that they had attempted to file for the 2002 tax year. Plaintiffs' 2003 federal income tax return was rejected by the IRS. At that point David Walter became angry and decided not to file a federal income tax return or pay any federal income taxes for the 2003 tax year. See also D. Walter Dep. at 28.
Def.'s Br. (Docket No. 20) Ex. A.
Carney took charge of preparing the Walters' state and federal income tax returns for the 2002 tax year and subsequent tax years. He also took charge of getting records of the Walters' income from their broker, their banks, David Walter's employer, and companies in which David Walter owned stock. Carney wrote letters requesting those records, which David Walter signed. David Walter also went to a former employer to obtain some records.
Plaintiffs have submitted an affidavit by David Walter as an attachment to their motion for summary judgment (Docket No. 17 Ex. C.) He states that, when he and his wife first met with James Carney, they told him that they had not filed federal or state income tax returns for 2002 through 2005. (Walter Aff. ¶ 5.)
During the period 1996 through 2006 when he worked as a school bus driver, David Walter signed and filed tax returns for the Penn Hills School District/Municipality, consisting of a statement verifying that he had earned the amount of wages shown on the statement and had taxes withheld from his pay. In addition, David Walter continued to pay many township, county, and school district/municipality real estate taxes, although he did not pay all of those taxes.
David Walter states in his affidavit that, in the spring of 2009, he had "bills for several years of unpaid real property taxes from Allegheny County, Penn Hills Township and Penn Hills School District. Allegheny County had initiated court proceedings. James Carney helped me resolve these problems." (Walter Aff. ¶ 6.)
Plaintiffs filed this action on April 9, 2009. The complaint asserts jurisdiction pursuant to 28 U.S.C. § 1346(a)(1) and seeks: 1) an order requiring the IRS to grant the refund in the amount of $5670; 2) an order requiring the IRS to apply this refund first to the underpayment of taxes for 2003 and 2004; 3) an order requiring the IRS to eradicate the assessment of penalties and interest for such years; 4) an order requiring the IRS to refund the balance of the 2002 refund with interest; 5) an award of attorney's fees; and 6) an award of costs.
In their motion for summary judgment, Plaintiffs request permission to amend the complaint to include tax years 2005 and 2006.
On October 31, 2009, the parties filed cross-motions for summary judgment. Standard of Review
Summary judgment is appropriate "`if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Woodside v. School Dist. of Philadelphia Bd. of Educ., 248 F.3d 129, 130 (3d Cir. 2001) (quoting Foehl v. United States, 238 F.3d 474, 477 (3d Cir. 2001) (citations omitted)). In following this directive, a court must take the facts in the light most favorable to the non-moving party, and must draw all reasonable inferences and resolve all doubts in that party's favor. Doe v. County of Centre, Pa, 242 F.3d 437, 446 (3d Cir. 2001); Woodside, 248 F.3d at 130; Heller v. Shaw Indus., Inc., 167 F.3d 146, 151 (3d Cir. 1999).
When the non-moving party will bear the burden of proof at trial, the moving party's burden can be "discharged by `showing' — that is, pointing out to the District Court — that there is an absence of evidence to support the non-moving party's case."Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If the moving party has carried this burden, the burden shifts to the non-moving party who cannot rest on the allegations of the pleadings and must "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
A taxpayer seeking a refund of taxes erroneously or unlawfully assessed or collected may bring an action against the Government either in United States district court or in the United States Court of Federal Claims. 28 U.S.C. § 1346(a)(1); EC Term of Years Trust v. United States, 550 U.S. 429, ___, and n. 2, 127 S.Ct. 1763, 1766 n. 2, 167 L.Ed.2d 729 (2007). The Internal Revenue Code specifies that before doing so, the taxpayer must comply with the tax refund scheme established in the Code. United States v. Dalm, 494 U.S. 596, 609-610, 110 S.Ct. 1361, 108 L.Ed.2d 548 (1990). That scheme provides that a claim for a refund must be filed with the Internal Revenue Service before suit can be brought, and establishes strict timeframes for filing such a claim.
(a) Period of limitation on filing claim. — 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 no return was filed by the taxpayer, within 2 years from the time the tax was paid. Claim for credit or refund of an overpayment of any tax imposed by this title which is required to be paid by means of a stamp shall be filed by the taxpayer within 3 years from the time the tax was paid.
(1) Filing of claim within prescribed period. — No credit or refund shall be allowed or made after the expiration of the period of limitation prescribed in subsection (a) for the filing of a claim for credit or refund, unless a claim for credit or refund is filed by the taxpayer within such period.
(2) Limit on amount of credit or refund. —
(A) Limit where claim filed within 3-year period. — If the claim was filed by the taxpayer during the 3-year period prescribed in subsection (a), the amount of the credit or refund shall not exceed the portion of the tax paid within the period, immediately preceding the filing of the claim, equal to 3 years plus the period of any extension of time for filing the return. If the tax was required to be paid by means of a stamp, the amount of the credit or refund shall not exceed the portion of the tax paid within the 3 years immediately preceding the filing of the claim.
(B) Limit where claim not filed within 3-year period. — If the claim was not filed within such 3-year period, the amount of the credit or refund shall not exceed the portion of the tax paid during the 2 years immediately preceding the filing of the claim.
(C) Limit if no claim filed. — If no claim was filed, the credit or refund shall not exceed the amount which would be allowable under subparagraph (A) or (B), as the case may be, if claim was filed on the date the credit or refund is allowed.
26 U.S.C. § 6511(a-b). "Read together, the import of these sections is clear: unless a claim for refund of a tax has been filed within the time limits imposed by § 6511(a), a suit for refund, regardless of whether the tax is alleged to have been `erroneously,' `illegally,' or `wrongfully collected,' §§ 1346(a)(1), 7422(a), may not be maintained in any court."Dalm, 494 U.S. at 602 (citation omitted). A tax return that claims a refund is considered a "claim" for purposes of § 6511. 26 C.F.R. § 301-6402-3(a)(1, 5), (c).
(1) In general. — In the case of an individual, the running of the periods specified in subsections (a), (b), and (c) shall be suspended during any period of such individual's life that such individual is financially disabled.
(2) Financially disabled. —
(A) In general. — For purposes of paragraph (1), an individual is financially disabled if such individual is unable to manage his financial affairs by reason of a medically determinable physical or mental impairment of the individual which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. An individual shall not be considered to have such an impairment unless proof of the existence thereof is furnished in such form and manner as the Secretary may require.
(B) Exception where individual has guardian, etc. — An individual shall not be treated as financially disabled during any period that such individual's spouse or any other person is authorized to act on behalf of such individual in financial matters.
§ 6511(h).
Congress added § 6511(h) in 1998 in response to the Supreme Court's opinion in United States v. Brockamp, 519 U.S. 347 (1997), where the Court concluded that Congress did not intend to allow equitable considerations, such as the existence of a mental disability, to affect § 6511's time limitations. See Brosi v. Comm'r, 120 T.C. 5, 12 n. 6 (2003).
Revenue Procedure 99-21 "sets forth in detail the `form and manner' in which proof of financial disability must be provided."Bova v. United States, 80 Fed. Cl. 449, 455 (Fed. Cl. 2008). The procedure provides that the following statements are to be submitted with a claim for credit or refund of tax to claim financial disability for purposes of § 6511(h):
Helen suffers from Stiff person's Syndrome which is an extremely rare neurological disease. This disease is progressive in nature. There is no cure for the disease. Typically, as in Helen's case, the disease results in increasing inability for the afflicted person to control their muscles and take physical actions. The disease has resulted in Helen being wheelchair dependent for the last several years. The disease is often accompanied by depression although it is not clear where such depression is caused in a biological standpoint by the disease or whether it is the result of the suffering incurred by . . . her affliction. This depression has been extremely severe in Helen's case. In addition, Helen has suffered for a number of years from short term memory loss which along with the depression precludes her functioning in the manner that one would expect for a healthy individual of her age. Indeed, she cannot be left alone by David and accordingly goes to an adult day care center two or three days a week.
This letter is also to certify that the statements contained in my letter of March 1, 2008 and this letter are true and correct to the best of my knowledge, information and belief.
(Pl.'s Supp. Ex. 1.)
The United States contends that strict compliance with Revenue Procedure 99-21 is required and that, absent such compliance, a court cannot make a finding of financial disability under § 6511(h). However, the cases cited by the United States do not resemble this case. In many of them, no physician statement was submitted at all. See Perkins v. Comm'r, 2008 WL 4977439, at *2-3 (Tax Ct. Nov. 20, 2008); Glover v. United States, 2005 WL 1926614, at *2 (E.D. Mich. July 11, 2005) (no statement submitted, court held hearing at which plaintiff failed to demonstrate that he met the tolling requirements); Bhattacharyya v. United States, 2005 WL 608269, at *3 (D. Or. Mar. 16, 2005) (no physician statement discussed or apparently submitted, complaint alleged only that plaintiff suffered from high blood sugar and was required to stay out of work for 60 days). See also Ibeagwa v. United States, 2009 WL 3172165, at *4 (N.D. Ill. Sep. 30, 2009) (plaintiff submitted an optometrist's statement that his vision problem was correctable which made no comment on his ability to manage his financial affairs); Green v. Comm'r, 2009 WL 1392625, at *3 n. 3 (Tax Ct. May 19, 2009) (plaintiff submitted a letter from a clinical psychologist, but they are not recognized as "physicians" under 42 U.S.C. § 1495x(r)); Henry v. United States, 2006 WL 3780878, at *4 (N.D. Tex. Dec. 26, 2006) (two statements were submitted, but neither was from a treating physician and they stated only that it was "possible" the plaintiff could not manage her financial affairs). No case has ever held that a treating physician's statement that contains a technical deficiency that is easily corrected is insufficient under § 6511(h). On the contrary, there is a doctrine of allowing informal refund claims that are "deficient merely in one or two of the technical requirements imposed by the Treasury regulation," Commissioner v. Ewing, 439 F.3d 1009, 1015 (9th Cir. 2006) (citation omitted).
Two of the cases cited by the United States are completely inapposite: Nunn v. United States, 2009 WL 260803, at*4 (W.D. Ky. Feb. 4, 2009), holds that incarcerated persons may not utilize § 6511(h), and Brosi v. Commissioner, 120 T.C. 5, 10-11 (2003), holds that a busy commercial pilot could not cite his responsibility to care for his disabled mother to invoke § 6511(h).
In this case, the United States argues that Dr. Balestrino's letter contained two deficiencies: it did not state that David Walter's physical impairment prevented him from managing his financial affairs and it did not contain a certification. However, the clear import of Dr. Balestrino's letter was that David Walter's clinical depression prevented him from managing his financial affairs: it stated, inter alia, that "the depression results in inertia which often prevents him from performing the simplest everyday tasks such as answering the telephone." The letter also provided no reason to conclude that Dr. Balestrino would not certify that he was giving a true, accurate and complete description of the Walters' condition. To the extent the letter did not meet these technical requirements, these deficiencies were remedied by Dr. Balestrino's supplemental letter. Moreover, the IRS did not reject Dr. Balestrino's letter. Rather, it simply never addressed it.
Plaintiffs have averred that the IRS lost the administrative file. The United States has not denied this statement.
The Court concludes that Plaintiffs have demonstrated that they substantially complied with Revenue Procedure 99-21 by providing Dr. Balestrino's letter and that they have cured any technical deficiencies by submitting the supplemental letter. Therefore, the Court need not consider the parties' additional arguments that David Walter's deposition testimony demonstrates (according to Plaintiffs) or undermines (according to the United States) his claim of financial disability. It is noted that the United States does not cite any medical evidence, but refers only to David Walter's deposition. Plaintiffs have complied with Revenue Procedure 99-21 and have demonstrated that they are entitled to the tolling provision of § 6511(h).
Ironically, the United States attempts to use David Walter's deposition testimony against him although this testimony did not exist at the time the IRS was presented with Plaintiffs' refund request accompanied by Dr. Balestrino's letter and although neither the statute nor the revenue procedure contemplates taking such depositions and using them in this manner.
The United States contends that Plaintiffs cannot recover any amounts for the 2003 and 2004 tax years because they did not pay their federal tax liability in full prior to bringing suit. Plaintiffs respond that if the IRS credits them with the overpayment of taxes they undisputedly made in the 2002 tax year, that amount is sufficient to cover the taxes owed (after withholding) for the following four years. They note that the Stipulated Decision by the Tax Court recognizes that, if they prevail in recovering overpayments made in the 2002 tax year, they will be entitled to the refund of all monies seized with respect to years 2003 and 2004. (Pl.'s Br. Ex. B at 2-3.)
The Court of Appeals has stated that "the Supreme Court concluded that `§ 1346(a)(1), correctly construed, requires full payment of the assessment before an income tax refund suit can be maintained in a Federal District Court.'" Koss v. United States, 69 F.3d 705, 708 (3d Cir. 1995) (quoting Flora v. United States, 362 U.S. 145, 177 (1960)).