Opinion ID: 40585
Heading Depth: 3
Heading Rank: 1

Heading: Origin of the Deposit-Payment Distinction

Text: 12 The distinction between deposits and payments was first established in Rosenman. In that case, the Supreme Court considered whether the predecessor to the current look-back provision barred a claim for refund of estimated estate taxes that the decedent's executors had remitted in response to an absolute deadline, but which they strenuously disputed as erroneous. Rosenman, 323 U.S. at 659-61, 65 S.Ct. 536, 89 L.Ed. 535 (1945). The executors had included a transmittal letter with the remittance, emphasizing that [t]his payment is made under protest and duress, and solely for the purpose of avoiding penalties and interest, since it is contended by the executors that not all of this sum is legally or lawfully due. Id. at 660, 65 S.Ct. 536 (internal quotation marks omitted). The IRS credited the remittance to a special suspense account, which was created to hold the funds because no taxes had yet been formally assessed against the estate. Id. After completing an audit of the return nearly three years later, the IRS formally assessed a deficiency. Id. When the executors brought a claim for refund more than three years after the remittance—but within three years of the IRS's formal assessment—the claim was rejected as time barred. Id. at 660-61, 65 S.Ct. 536. 13 In deciding that the taxes were not paid—and that the limitations period therefore did not commence—until the tax was actually assessed by the IRS, the Supreme Court specifically considered all of the facts and circumstances surrounding the executors' original remittance, including the executors' intent as stated in the transmittal letter and the IRS's treatment of the remittance once received. Id. at 661-63, 65 S.Ct. 536. The Court determined that when the executors submitted the remittance, they did not discharge what [they] deemed a liability nor pay one that was asserted. There was merely an interim arrangement to cover whatever contingencies the future might define. Id. at 662, 65 S.Ct. 536. Noting the IRS's deposit of the funds into a suspense account, the Court concluded that [m]oney in these accounts is held not as taxes duly collected are held but as a deposit made in the nature of a cash bond for the payment of taxes thereafter found to be due. Id. The Court ruled that considering the specific facts and circumstances of the case, the remittance was a deposit and that the statute of limitations therefore did not bar the executors' claim for refund. Courts have since read Rosenman as creating a facts-and-circumstances test for distinguishing between deposits and payments. See, e.g., VanCanagan v. United States, 231 F.3d 1349, 1352-53 (Fed.Cir.2000); Moran v. United States, 63 F.3d 663, 667-68 (7th Cir.1995); Blatt v. United States, 34 F.3d 252, 255 (4th Cir.1994); Ewing v. United States, 914 F.2d 499, 503-04 (4th Cir.1990); Fortugno v. Comm'r, 353 F.2d 429, 435-36 (3d Cir.1965); Risman, 100 T.C. at 197-99. However, this Circuit did not join those courts in their reading of Rosenman.