Opinion ID: 868140
Heading Depth: 4
Heading Rank: 1

Heading: Mitigation Provisions

Text: The mitigation provisions in the Internal Revenue Code allow qualifying taxpayers to bring refund claims that would otherwise be barred by the statute of limitations. See I.R.C. § 1311(a); TLI, Inc. v. United States, 100 F.3d 424, 427-28 (5th Cir. 2012). Mitigation applies only if: (1) there has been a final determination under § 1313; (2) there has been a ―circumstance of adjustment‖ under § 1312; and (3) one of the ―conditions necessary for adjustment‖ in § 1311(b) has been met. See Kappel’s Estate v. C.I.R, 615 F.2d 91, 94 (3d Cir. 1980). ―The relief provided by the mitigation statutes is limited to defined circumstances, and does not purport to permit the correction of all errors and inequities.‖ Fruit of the Loom, Inc. v. C.I.R., 72 F.3d 1338, 1341 (7th Cir. 16 1996) (citations and internal quotation marks omitted). The mitigation provisions should be given a liberal interpretation. See Koss v. United States, 69 F.3d 705, 709 (3d Cir. 2005). The taxpayer bears the burden of proving that each of the three mitigation provisions applies. Id. The mitigation provisions do not afford relief to McGrogan because he cannot show that a ―circumstance of adjustment‖ has occurred. McGrogan claims a circumstance of adjustment for the double inclusion of income. However, the Internal Revenue Code permits mitigation for the double inclusion of income only if the taxpayer‘s claim involves ―an item which was erroneously included in the gross income of the taxpayer for another taxable year or in the gross income of a related taxpayer.‖ I.R.C. § 1312(1). Such a double inclusion has not occurred in this case. McGrogan does not allege having erroneously paid taxes in an incorrect tax year nor has he claimed to have erroneously paid taxes for a related taxpayer. Rather, McGrogan‘s overpayment of taxes is a situation not contemplated by the mitigation statute: payment to the wrong taxing entity. Although we should liberally interpret the mitigation statute, we may not rewrite its terms. As a result, the mitigation statute does not apply because the circumstance of adjustment claimed by McGrogan is outside the ambit of I.R.C. § 1312(1). Even though McGrogan‘s claim falls outside the scope of the mitigation statute, he seeks an exception to it because of the special relationship between the United States and the Virgin Islands and the purportedly collusive coordination of tax policy between the IRS and the VIBIR. McGrogan also points to a possibility of double taxation. Again, while we are cognizant of the equitable concerns presented in this case, 17 these policy arguments still do not change the fact that McGrogan‘s claims fall outside of the mitigation scheme established by Congress. We are powerless to create a judicial exception to the mitigation statute to accommodate him. See, e.g., United States v. Dalm, 494 U.S. 596, 602 (1990) (absent a statutory exception, when statute of limitations is expired, ―a suit for refund, regardless of whether the tax is alleged to have been ‗erroneously,‘ ‗illegally,‘ or ‗wrongfully collected,‘ may not be maintained in any court.‖). For these reasons, McGrogan may not use the mitigation statute to avoid the statute of limitations bar.