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Miller v. United States - 38 F.3d 473 (9th Cir. 1994)


In a case in which a taxpayer does not file a return as of two years after the date of payment of the taxes, any claim for refund is untimely under I.R.C. § 6511(a). A later return cannot resurrect the three-year period of § 6511(a)


Plaintiffs Robin and Diane Miller sought a refund of federal income taxes withheld from their wages. They filed an action in federal district court pursuant to 28 U.S.C.S. § 1346(a)(1). The district court dismissed the action as untimely. 

Plaintiffs failed to prepare a timely income tax return for tax year 1986. In either June 1989 or Feb. 1990, the Internal Revenue Service ("IRS") prepared a substitute return for that year pursuant to 26 U.S.C.S. ( I.R.C.) § 6020 (b). The IRS mailed a notice of deficiency to plaintiffs on Aug. 23, 1989. Plaintiffs did not prepare a return for 1986 until April, 1990. It was mailed on April 16, 1990 and received at by the IRS on April 18. That filing was deficient because it lacked a necessary schedule (pertaining to partnership losses) and because a photocopy, with only a photocopied signature, was mailed. In Feb. 1991, a corrected return was filed.

Both filings by plaintiffs asserted a claim for a refund. The IRS issued a notice of disallowance of claim regarding the April 1990 return on May 23, 1991. Plaintiffs filed suit in the federal district court in April 1992. The district court granted the government's motion to dismiss for lack of jurisdiction because it concluded that, under I.R.C. § 6511(a), there had been no timely claim for a refund. A timely claim was a jurisdictional prerequisite to an action for recovery of taxes paid. I.R.C. § 7422(a)The district court decided that the claim had to be filed within two years of the payment of the taxes because the return was filed after April 16, 1987, the due date for 1986 returns. The court also decided, in the alternative, that the claim was filed upon receipt, not mailing, and therefore none of the taxes at issue could be recovered because they had been paid more than three years before the claim.


Was plaintiffs' claim for a refund time-barred?




The Internal Revenue Code provided that a claim for a refund was timely if 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 two years from the time the tax was paid. 

Giving effect to the portion of § 6511(a) that only allows two years for filing a claim where no return was filed was also necessary to prevent a disparity in the adjudication of tax claims. Plaintiffs would have been barred from recovering any taxes paid if they had petitioned the tax court rather than bringing an action in the district court. On Aug. 23, 1989, the Commissioner sent plaintiffs a notice of deficiency. Under I.R.C. § 6512(b)(3)(B)2  the relevant limitations period is that which would be applicable if a claim were filed on the date that the notice of deficiency was mailed. Because no tax return had been filed at the time of the notice of deficiency, the three-year period prescribed by § 6511(a) was inapplicable. Instead, the applicable period was the two-year period of § 6511(a) for cases in which "no return is filed."  As a result, refunds may be made only to the extent that they reflected taxes paid during the two years immediately preceding the date of the deficiency notice. § 6511(b)(2)(B). The alleged overpayment occurred before Aug. 23, 1987, the date two years before the deemed claim. Therefore, under section 6512(b)(3), no credit or refund was allowable. 

Taxpayers were not supposed to derive an advantage by choosing one forum over another. Had plaintiffs petitioned the tax court rather than instituting an action in the district court, they would have been barred from recovering, and the tax court's decision would have divested the district court of jurisdiction to consider the claim. If a return filed three years after the payment started another three year period for asserting a claim, the choice not to proceed in the tax court would give taxpayers up to four additional years to pursue refund claims. To hold that the filing of a return more than two years after payment of taxes invoked the three-year period of § 6511(a) would reward strategic behavior on the part of taxpayers and create a discrepancy in limitations periods that was not intended by the Internal Revenue Code. The court concluded that § 6511(a) operated consistently to give taxpayers the right to file a claim up to three years after the return only where that return is filed within two years of payment of the taxes.

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