Opinion ID: 558085
Heading Depth: 1
Heading Rank: 2

Heading: sufficiency of claim for refund

Text: 7 Goulding's second argument merits more attention. The district court held that it lacked jurisdiction to consider any issues, other than the sufficiency of the notice of deficiency, because no other grounds were specifically alleged in the claim for refund. An administrative claim for refund must be filed before a claimant may bring suit in a district court. 26 U.S.C. Sec. 7422(a). 2 A timely, sufficient claim for refund is a jurisdictional prerequisite to a refund suit. Martin v. United States, 833 F.2d 655, 658-59 (7th Cir.1987). The taxpayer is required to file the administrative claim for refund within either two years from the date the tax is paid or three years from the date the tax return is filed, whichever is later. 26 U.S.C. Sec. 6511(a). Treasury Regulation Sec. 301.6402-2(b)(1) provides: 8 The claim must set forth in detail each ground upon which a credit or refund is claimed and facts sufficient to apprise the Commissioner of the exact basis thereof. The statement of the grounds and facts must be verified by a written declaration that it is made under the penalties of perjury. A claim which does not comply with this paragraph will not be considered for any purpose as a claim for refund or credit. 9 The district judge held that the only ground Goulding presented in the claim for refund was that the IRS failed to notify him of the deficiency. The court ruled that Goulding's claim for refund did not sufficiently or specifically identify any other ground as an entitlement for refund. The court also concluded that the IRS did not waive its defense challenging the sufficiency of the claim. Because the district court agreed that the notice was insufficient, the court held that it lacked jurisdiction to reach the merits of the other claims. 10 Goulding argues that the government waived the defense that the claim for refund was insufficient because it was raised too late. The defense was not raised by the IRS when it initially denied his request for refund nor in the government's answer to the complaint. Goulding also contends that even though the claim was general, the IRS was aware of the basis of his claim and acted on the merits. Therefore, the claim sufficiently notified the IRS of the grounds which Goulding alleged entitled him to a refund. 3 11 In its appellate brief, the government candidly states that its argument to the district court (and the district court's decision) concerning the waiver issue is not supportable. It points out that it was well aware of Goulding's claims. The government also emphasizes that it did not challenge the sufficiency of Goulding's claim for refund until the statute of limitations had tolled, effectively foreclosing Goulding's opportunity to amend or refile his claim. Thus, the government agrees that it waived the insufficiency defense and requests this court to remand the case for a determination on the merits. However, [j]urisdiction cannot be created merely by consent of the parties. United Steelworkers v. Libby, McNeill & Libby, 895 F.2d 421, 423 n. 2 (7th Cir.1990) (citing Bender v. Williamsport Area School Dist., 475 U.S. 534, 541, 106 S.Ct. 1326, 1331, 89 L.Ed.2d 501 (1986)). Therefore, because the sufficiency of the claim for refund has jurisdictional implications, the fact that the government now abandons its argument that the claim was insufficient is not dispositive.
12 In order for the district court to have jurisdiction over this claim, Goulding was required to file a claim for refund pursuant to 26 U.S.C. Sec. 7422(a). The language of Sec. 7422(a) requires compliance with the applicable Treasury regulations. Treasury Regulation Sec. 301.6402-2(b)(1) provides that any purported claim which does not comply with this paragraph will not be considered for any purpose as a claim for refund or credit. It would appear that if a claim is not sufficiently detailed according to this Treasury Regulation, the district court would lack jurisdiction. 13 The United States Supreme Court, however, has explained that while the Treasury may not waive the congressionally mandated requirement that a formal claim be filed, the Treasury can waive its own formal requirements. See Angelus Milling Co. v. Commissioner of Internal Revenue, 325 U.S. 293, 65 S.Ct. 1162, 89 L.Ed. 1619 (1945). The specificity requirements of Treasury Regulation Sec. 301.6402-2(b)(1) may be waived by the Commissioner of the IRS, if the IRS has sufficient knowledge of the claim and makes a determination on the merits. United States v. Memphis Cotton Oil Co., 288 U.S. 62, 53 S.Ct. 278, 77 L.Ed. 619 (1933); Angelus Milling Co., 325 U.S. 293, 65 S.Ct. 1162, 89 L.Ed. 1619 (1945); Vishnevsky v. United States, 581 F.2d 1249, 1252 (7th Cir.1978). Therefore, the filing of a general or vague claim may be sufficient to confer district court jurisdiction if the IRS had knowledge of the claim, thereby making the initial rejection of the claim for refund a determination on the merits. 14 The district court held that the IRS' initial decision denying Goulding's claim per audit determination could not be interpreted as a determination on the merits and a waiver of the specificity requirement. We cannot agree. Although the words per audit determination are ambiguous, the record demonstrates that the IRS had extensive knowledge of the claim. 15 The record reflects that the underlying dispute in this case involves the tax returns of several partnerships. It is clear that Goulding's claim for refund did not mention the basis of the dispute or provide any details explaining to the IRS why he believed a refund was in order. Goulding filed his claim for refund on July 7, 1987. In that claim, he stated that he was seeking a refund of $45,919.72 that he paid for an assessed tax deficiency arising in 1982. Goulding also noted that he could not be more specific because he was not aware of the exact items that were adjusted. On November 19, 1987, the IRS denied his claim per audit determination. The record demonstrates that by November 19, 1987, the IRS had already conducted an in-depth investigation concerning these partnerships. In September of 1987, the IRS had litigated, in a seven day trial, some of the same issues in a suit brought by the appellant's son. An opinion in that case was filed by the Tax Court on May 12, 1988. In addition, the IRS was able to respond substantively to Goulding's claims through all stages of this proceeding. This evidence demonstrates that the IRS was well aware of the merits of Goulding's claims when it denied the administrative claim for refund per audit determination. 16 The record also reflects that the IRS did not question the sufficiency of the claim until September, 1989, two years after the original claim was filed and after other defenses had been raised. The IRS did not raise the waiver issue when denying the administrative claim, nor in their answer to the complaint. The United States Supreme Court has held: 17 If the Commissioner chooses not to stand on his own formal or detailed requirements, it would be making an empty abstraction, and not a practical safeguard, of a regulation to allow the Commissioner to invoke technical objections after he has investigated the merits of a claim and taken action upon it. Even tax administration does not as a matter of principle preclude considerations of fairness. 18 Angelus Milling Co., 325 U.S. at 287, 65 S.Ct. at 1164-65. The fact that the government waited for several years to raise this defense points to waiver. If the Commissioner wished to have the claim dismissed based on its insufficiency, he was required to challenge the sufficiency at a much earlier stage in these proceedings. Indeed, the government has abandoned its position on appeal and agrees that it waived this defense. The record fully supports the conclusion that the IRS initially considered the claim on its merits. To find that the IRS did not waive this defense would be fundamentally unfair.