Opinion ID: 194740
Heading Depth: 2
Heading Rank: 1

Heading: Equitable Tolling of Section 6511(a) and (b)

Text: As the district court noted, 28 U.S.C. 1346(a)(1) gives federal district courts jurisdiction over suits against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected. Likewise, the court correctly observed that the jurisdictional grant in section 1346(a)(1) must be read to incorporate the requirements of 26 U.S.C. 7422(a) and 6511(a). See United States v. Dalm, 494 U.S. 596, 601-02, 608-10 (1990). Section 7422(a) provides that no suit for a tax refund may be maintained unless 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. Section 6511(a) states that a refund claim must be filed 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. Thus, section 6511(a) -6- 6 distinguishes between taxpayers who file returns and those who do not. Taxpayers who file returns have the longer of three years from the time they filed their return or two years from the time they paid their taxes to file a claim for refund, whereas taxpayers who have not filed returns have only two years from the time they paid their taxes to file their refund claims. A refund suit must have been timely filed under one of the limitations periods in section 6511(a) for the district court to obtain jurisdiction over the suit. Dalm, 494 U.S. at 609. The district court did not explain clearly how Oropallo's claim was untimely under section 6511(a). Its opinion contained language which would support either the conclusion that it had applied the three-year limitations period for taxpayers filing returns or that it had applied the shorter two-year limitations period for taxpayers who did not file returns. The government urges us to affirm the district court's implicit holding that the two-year limitations period for nonfiling taxpayers applies and that Oropallo's late return is not a return which triggers application of the three-year limitations period. Although it acknowledges that there is a split in authority on the question whether a return filed after its due date is a return within the meaning of section 6511(a), compare, e.g., Musser v. Commissioner, 92-1 USTC 50,245 (D. Alaska -7- 7 1991) (the two-year limitations period measured from the time the tax was paid is applicable to taxpayers filing late returns), with Mills v. United States, 805 F. Supp. 448, 450 (E.D. Tex. 1992) (the three-year limitations period beginning when the return is filed applies to a taxpayer filing a late return), the government argues that a finding that taxpayers filing late returns have only two years from the time their taxes are paid to file refund claims better reflects the statutory language. We need not resolve this question in light of our determination on the tolling issue. For purposes of our present analysis, therefore, we assume for the sake of argument that the cases holding that a late return is a return within the meaning of section 6511(a) are correct. Accordingly, we also assume that, if Oropallo filed his claim for a refund within three years of his return, his refund claim would be timely. Under 26 C.F.R. 301.6402-3(a), a return which claims a refund may be considered a claim for refund under section 6511(a). Oropallo's return, which was filed on March 19, 1990, claimed a refund. Therefore, the claim, having been filed on the same day as his return, would obviously have been filed within three years of the filing of the return and so was timely. This assumption, however, does not mean victory for Oropallo. As the government says, section 6511(b)(2)(A) -8- 8 places a cap on recovery of a refund which, in Oropallo's case, prevents recovery of any taxes paid for the 1983 tax year. Specifically, section 6511(b)(2)(A) states that, with respect to a claim filed during the three-year period in section 6511(a), the amount of the refund is limited to 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. Since Oropallo filed his claim on March 19, 1990, he may recover only taxes paid in the preceding three years -- i.e., any taxes paid on or after March 19, 1987. (As the government notes, Oropallo has not claimed that he received any extension of time for filing his 1983 return.) Under 26 U.S.C. 6513(b)(1), Oropallo's taxes were deemed paid on April 15, 1984, well before the cut-off date of March 19, 1987. Therefore, he may not recover any portion of those taxes. Section 6511(b)(2)(A) explicitly forecloses any refund for taxes not paid within the three-year period preceding the date the claim was filed.1 Essentially, 1. Thus, where the taxes sought to be recovered are deemed paid as of the date the return was due (and no extension for filing the return was granted), a return such as Oropallo's, which itself is the refund claim, must be filed within three years of its due date for the taxpayer to be able to recover any of the taxes paid. Basically, for a taxpayer in Oropallo's situation, section 6511(a) and (b)(2)(A) work together with section 6513(b)(1) to impose a three-year statute of limitations on refund claims, measured from the -9- 9 therefore, it establishes an additional limitations period separate from the three-year period in section 6511(a). See, e.g., Mills v. United States, 805 F. Supp. 448, 450 (E.D. Tex. 1992) (for a taxpayer who has filed a return, the provisions of section 6511(a) and (b)(2)(A) establish two limitations hurdles -- (1) a refund claim must be filed within three years after the tax return is filed, and (2) the amounts sought to be recovered must actually have been paid in the three-year period preceding the filing of the claim). That additional limitations period effectively bars some of the refund claims which would be unquestionably timely under section 6511(a). See, e.g., Rainey v. United States, 82-2 USTC 9442 (N.D. Ala. 1982) (the taxpayer's claim was not untimely under section 6511(a), but it was denied under section 6511(b)(2)(A) because the taxes had not been paid within the prescribed period before the claim was filed); McGregor v. United States, 80-2 USTC 9647 (Ct. Cl. 1980) (same). Accordingly, unless the additional limitations period imposed by section 6511(b)(2)(A) is equitably tolled, Oropallo's action should be dismissed. original due date of the tax return. See Tallon v. United States, 84-2 USTC 9926 (C.D. Ill. 1984) (after discussing the effect of sections 6511(b)(2)(A) and 6513(b)(1) on the taxpayers' timely refund claim, which was made in a late return, the court concluded that the Plaintiffs have been barred from recovering their refund by failure to file their returns within three years of the time they were due). -10- 10 2. Equitable Tolling Oropallo argues that the limitations period should be tolled [i]n the interests of justice given the extremely mitigating and extenuating circumstances of his case. In our opinion, only Oropallo's alleged carbon monoxide poisoning could qualify for that characterization.2 The government interprets Oropallo's argument to be an attempt to invoke either the mitigation provisions of the tax code, 26 U.S.C. 1311-14, or the judicial doctrine of equitable recoupment. It correctly points out that neither the mitigation provisions nor the equitable recoupment doctrine apply. In view of Oropallo's status as a pro se petitioner, however, we think we have an obligation to go beyond the government's brief and to take account of recent 2. We assume that carbon monoxide poisoning, which Oropallo alleges not only incapacitated him for several years, but also deprived him of his ability to know that he had not filed a 1983 tax return, would be analogous to mental incapacity and thus could be a ground for equitable tolling if Oropallo could show that his alleged poisoning had actually prevented him from filing his 1983 return on time or from remembering earlier than 1989 that he had not done so. See Lopez v. Citibank, N.A., 808 F.2d 905, 907 (1st Cir. 1987) (assuming, in a suit between private parties, that mental illness might sometimes toll the statute of limitations, the court concluded that it did not do so where the plaintiff was represented by counsel at the relevant time and so was not actually prevented from timely filing suit by his mental illness). The other grounds for equitable tolling which Oropallo alleges do not appear to have caused him to delay filing his return, either in 1983 or in 1989 after he learned that his 1983 return had not been filed. For that reason, we do not see how they could be found to excuse that delay. -11- 11 developments in the law which are not discussed by the government. Before 1990, Oropallo would have had no basis for claiming that the limitations periods in section 6511 should be equitably tolled. Courts traditionally have declined to apply equitable principles to toll statutes of limitations against the United States, on the theory that the United States could be sued only by virtue of its waiver of its sovereign immunity and that the terms of any such waiver had to be strictly construed. Irwin v. Veterans Administration, 498 U.S. 89, 111 S. Ct. 453, 458-59 (1990) (White, J., concurring); see, e.g, United States v. Dalm, 494 U.S. 596, 608 (1990).3 Therefore, except in clearly unique situations which do not apply here, the limitations periods in section 6511 have not been equitably tolled. See, e.g., Ellis v. United States, 82-1 USTC 9214 (Ct. Cl. 1982) ([t]here is nothing in any of the[] provisions [relating to tax refunds] that permits an exception to th[e] time limitation to be made 3. In addition, tax laws have been viewed as technical laws which are not subject to general principles of equity. See Lewyt Corporation v. Commissioner, 349 U.S. 237, 249 (1955); Ewing v. United States, 914 F.2d 499, 501 (4th Cir. 1990), cert. denied, 111 S. Ct. 1683 (1991). Consequently, courts have required strict adherence to the administrative prerequisites set out in the Internal Revenue Code, including the explicit and clearly stated limitations periods at issue here. See Dalm, 494 U.S. at 608-10; In re Graham, 981 F.2d 1135, 1138 (10th Cir. 1992); Bruno v. United States, 547 F.2d 71, 73-74 (8th Cir. 1976); Dixon v. United States, 85-1 USTC 9173 (Cl. Ct. 1985). -12- 12 because of the illness of the taxpayer or his family or other extenuating circumstances); Stepka v. United States, 196 F. Supp. 184, 185 (E.D.N.Y. 1961) (the statute of limitations relating to refund claims under the pre-1954 tax code is inflexible and so not tolled by the taxpayer's mental incompetency; there are only rare exceptions to the rigid prevailing rule[] that such statutes of limitations cannot be extended in any circumstances, e.g., the prisoner of war or fraud situation); contrast, e.g., Daney v. United States, 247 F. Supp. 533, 535 (D. Kan. 1965) (the court permitted tolling of the limitations period on a refund claim by a noncompetent restricted Indian because the general rules of tax law do not apply in a strict manner to restricted Indians), aff'd, 370 F.2d 791 (10th Cir. 1966). In Irwin v. Veterans Administration, 498 U.S. 89, 111 S. Ct. 453 (1990), however, the Supreme Court changed its approach to the issue of equitable tolling in suits against the government, holding that the same rebuttable presumption of equitable tolling applicable to suits against private defendants should also apply to suits against the United States. Id. at 457.4 In reliance on Irwin, several 4. Although the Court's opinion presents some interpretive difficulties, it would seem to have overruled or made irrelevant prior case law which sought to determine whether a particular limitations period could be tolled by determining whether the time limit was jurisdictional or not. See, e.g., Soriano v. United States, 352 U.S. 270, 276 (1957) (holding that a limitations period on claims against the United States -13- 13 federal district courts have permitted equitable tolling of the limitations period in section 6511(a) or (b)(2)(A) in view of a taxpayer's argument that mental incompetence had kept him or her from timely filing a refund claim. See Wiltgen v. United States, -- F. Supp. --, 93-1 USTC 50,044 (N.D. Iowa 1992) (section 6511(b)(2)(A)); Scott v. United States, 795 F. Supp. 1028 (D. Hawaii 1992) (stating that equitable tolling of section 6511(a) was at issue, although the facts indicate that section 6511(b)(2)(A) could have been involved as well); Johnsen v. United States, 758 F. Supp. 834 (E.D.N.Y. 1991) (section 6511(b)(2)(A)).5 In our view, the contained in the statute granting jurisdiction over such claims could not be tolled); see Irwin, 111 S. Ct. at 458-59 (White, J., concurring) (establishing a presumption in favor of equitable tolling against the government was inconsistent with the Court's traditional approach and essentially overruled Soriano). The key issue is still Congressional intent, but, by creating a presumption in favor of equitable tolling, the Court has squarely placed on the government the burden of showing that a particular limitations period may not be equitably tolled. Cf. Schmidt v. United States, 933 F.2d 639, 640 (8th Cir. 1991) (in an action under the Federal Tort Claims Act after Irwin, the government has the burden of establishing the statute of limitations as an affirmative defense). 5. But see Vintilla v. United States, 931 F.2d 1444, 1447 & n.1 (11th Cir. 1991), in which the court adhered to a preIrwin mode of analysis and ruled that the limitations period in section 6511(a) may not be equitably tolled since timely filing of a refund claim is a jurisdictional prerequisite to suit. In Vintilla, the taxpayer had been required to pay upfront the entire tax due on his severance benefit whereas similarly situated taxpayers paid taxes as if receiving the benefit in installments. The IRS had told the taxpayer that a refund claim could be filed after he litigated the mode of payment of the severance benefit; after the litigation had -14- 14 relevant analysis has been altered yet again by a more recent Supreme Court decision. In Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, -- U.S. --, 111 S. Ct. 2773 (1991), the Supreme Court considered whether to adopt a federal limitations period in private suits under section 10(b) of the Securities Exchange Act of 1934 and, if so, whether that period would be subject to equitable tolling.6 The Court concluded that a federal limitations period should be adopted. It selected the 1-and-3-year limitations periods contained in the 1934 Act and in the original remedial ended, however, the IRS denied the taxpayer's claim as untimely. 6. Although Lampf involved a lawsuit between private parties, it is clearly relevant here. As the Supreme Court stated in Irwin, equitable tolling principles in suits against the government should be consistent with those applied against private defendants, and should be employed no more favorabl[y] against the government than against private defendants. Irwin, 111 S. Ct. at 457, 458. Nor do we think that Lampf is inapplicable because it considered a statute of limitations applicable to bringing a lawsuit rather than time limits imposed on the filing of an administrative claim. If a specific equitable consideration would justify tolling the limitations period for filing suit, that same equitable consideration should justify tolling the administrative time limits which have been held to be prerequisites to bringing suit. See Johnsen v. United States, 758 F. Supp. 834, 835 n.1 (E.D.N.Y. 1991) (the same equitable considerations are involved in both judicial and administrative procedural defaults and so a distinction between the equitable tolling of judicial actions and administrative exhaustion requirements cannot reasonably be drawn); Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 388-89 & n.2, 393 (1982) (deciding that a statute of limitations requiring that a charge of discrimination be filed with the EEOC within 90 days of the alleged unlawful employment practice could be equitably tolled). -15- 15 provisions of the Securities Act of 1933, as typified by section 9(e) of the 1934 Act. See 111 S. Ct. at 2781, 2782 n.9. Section 9(e) prohibits any action for a violation of the section if not brought within one year after the discovery of the facts constituting the violation and within three years after such violation. Id. at 2780 n.6 (quoting 15 U.S.C. 78i(e)). Citing Irwin, the Court acknowledged that time limits in law suits are customarily subject to equitable tolling. It also agreed that, in fraud cases, the limitations period does not usually begin running until the fraud is discovered. Nevertheless, the Court held that time limits, expressed as in section 9(e), were not subject to equitable tolling. In the Court's view, it was evident that the equitable tolling doctrine is fundamentally inconsistent with the 1-and-3-year structure. Id. at 2782. It explained what it meant as follows: The 1-year period, by its terms, begins after discovery of the facts constituting the violation, making tolling unnecessary. The 3-year limit is a period of repose inconsistent with tolling. . . . [T]he inclusion of the three-year period can have no significance in this context other than to impose an outside limit. (Citations omitted.) Because the purpose of the 3-year limitation is clearly to serve as a cutoff, we hold that tolling principles do not apply to that period. Id. We think that section 6511(a) and (b)(2)(A) are structured like the 1-and-3-period considered by the Supreme -16- 16 Court in Lampf. Under section 6511, a taxpayer who has filed a return must clear two time barriers. The first one is in section 6511(a), which requires taxpayers to file a refund claim within three years of filing a return. We have assumed that a return can be filed at any time after its due date and still be a return for purposes of filing a claim within that three-year period. Under that interpretation, the limitations period in section 6511(a) is totally illusory. See, e.g., Mills v. United States, 805 F. Supp. 448, 451 (E.D. Tex. 1992) (section 6511(a) would permit a taxpayer to file a tax return 40 years late and still have 3 additional years in which to file a claim for refund). In this respect, the three-year period in section 6511(a) is analogous to the one-year period discussed in Lampf. The one-year period requires only that suit be filed within one year after discovery of the facts which give rise to the cause of action. Since the discovery of those facts could occur any number of years after the statutory violation had actually taken place, the 1-year period sets no real limit on when suit can be brought. The analogy between the limitations period in section 6511(a) and the 1-year period typified by section 9(e) extends even further. In Lampf, the Supreme Court commented that the one-year period for filing suit after discovery of the facts giving rise to the cause of action -17- 17 made tolling unnecessary. Lampf, 111 S. Ct. at 2782. What the Court obviously meant was that once someone who has been defrauded knows the relevant facts, the 1-year period gives that person ample time in which to sue and there is no need to toll the 1-year limitations period. A similar state of knowledge respecting the right to a refund can be attributed to individual calendar year taxpayers who file income tax returns. The return contains all the information necessary to verify that there has been an overpayment of taxes and that a refund is due. Accordingly, the three-year period in section 6511(a) gives the taxpayer ample time to file a refund claim, and there is no need to toll that period. Essentially, then, section 6511(a) serves simply to identify which taxpayers have properly positioned themselves to obtain a refund. Like the 1-year period in Lampf, however, it does not describe which of those potential claimants will actually succeed in pursuing their rights. That task is left to section 6511(b)(2)(A), which, significantly, the tax code characterizes not as a limitations period, but as a limit on [the] amount of credit or refund. See 26 U.S.C. 6511(b)(2)(A) (caption).7 As 7. Section 6511(b)(2)(A) works together with section 6511(a) and section 6513(b)(1) to bar recovery of any refund claims on late returns not filed within three years after the due date of the return, and thus it clearly operates like a statute of limitations. However, Congress's characterization of section 6511(b)(2)(A) as a limit on [the] amount of credit or refund rather than as a limitations period -18- 18 we said earlier, section 6511(b)(2)(A) limits the refund recoverable to the amount of tax paid in the three-year period immediately preceding the filing of the claim. For an individual calendar year taxpayer like Oropallo, taxes withheld from wages during the tax year are deemed paid on April 15th of the following year, the date when the tax return is due. See 26 U.S.C. 6513(b)(1). For that reason, if the return is not filed and the claim not made within the three years immediately following that date, section 6511(b)(2)(A) precludes the recovery of any of the taxes paid. Here, Oropallo's 1983 taxes were deemed paid on April 15, 1984, and his refund claim was timely filed on March 19, 1990, the same day he filed his return. Under section 6511(b)(2)(A) he may recover any taxes paid in the immediately preceding three-year period, i.e., on or after March 19, 1987. But all of the taxes Oropallo seeks to recover were paid before March 19, 1987, and thus he recovers nothing. Unquestionably, then, that date serves as an absolute cut-off point. By imposing an outside limit or cut-off on the amount of taxes which can be recovered, section 6511(b)(2)(A) operates like the three-year portion of the limitations period in Lampf, and thus is a period of indicates more clearly than a simple limitations period would that Congress intended to establish an outside limit on the recovery of refunds. -19- 19 repose inconsistent with tolling. See 111 S. Ct. at 2782. See Wiltgen v. United States, -- F. Supp. --, 93-1 USTC 50,044 (N.D. Iowa 1992) (calling section 6511(b)(2)(A) a period of repose, but, without referring to Lampf, finding that the section could be equitably tolled under Irwin); McGregor v. United States, 80-2 USTC 9647 (Ct. Cl. 1980) (calling the date beginning the three-year period immediately preceding the date of a refund claim the cut-off date). Because, together, section 6511(a) and (b)(2)(A) function like the 1-and-3-year period found inconsistent with equitable tolling in Lampf, we conclude that those provisions may not be equitably tolled.