Union Commerce Bank v. United States, C75-995.

• Citation: 463 F. Supp. 842
• Decision Date: 20 November 1978
• Docket Number: No. C75-995.,C75-995.
• Parties: UNION COMMERCE BANK, Executor of the Estate of Freeman A. Smith, Deceased, Plaintiff, v. UNITED STATES of America, Defendant.
• Court: United States District Courts. 6th Circuit. United States District Court of Northern District of Ohio

463 F. Supp. 842

UNION COMMERCE BANK, Executor of the Estate of Freeman A. Smith, Deceased, Plaintiff, v. UNITED STATES of America, Defendant.

No. C75-995.

United States District Court, N. D. Ohio, E. D.

November 20, 1978.

Joseph W. Gatz, Parma, Ohio, Richard A. Lesco (co-counsel), Marshman, Snyder, Seeley, Corrigan & Isaac, Cleveland, Ohio, for plaintiff.

Dennis M. Donohue, Trial Atty., Tax Div., U. S. Dept. of Justice, Washington, D. C., for defendant.

MEMORANDUM OF OPINION AND ORDER OF PARTIAL DISMISSAL

MANOS, District Judge.

In this case, plaintiff seeks a refund of estate taxes alleged to have been erroneously assessed against the estate of Freeman A. Smith. The defendant filed a motion for partial dismissal of the plaintiff's complaint on the ground that the claim for refund of $20,531.27 is barred by the applicable statute of limitations.¹ After an evidentiary hearing on the merits of the motion for partial dismissal, the court grants the defendant's motion.

Section 6532 of the Internal Revenue Code of 1954 provides a two-year statute of limitations within which suits must be filed for recovery of internal revenue taxes alleged to have been erroneously assessed. The statutory period begins to run on the "date of mailing by certified mail or registered mail by the Secretary or his delegate to the taxpayer of a notice to the taxpayer of the disallowance of the part of the claim to which the suit or proceeding relates."²

In this case, the taxpayer filed two claims with the Secretary; the first notice of disallowance was sent on May 21, 1973 and the second notice of disallowance was sent on April 7, 1975. Suit was filed on November 20, 1975. If the statute of limitations began to run upon the mailing of the first notice, the claim is barred; if, on the other hand, it began to run upon the mailing of the second notice, the claim is not barred.

There is no limit to the number of refund claims that a taxpayer may file with the Secretary. See, e. g., Kellogg-Citizens National Bank v. United States, 330 F.2d 635, 165 Ct.Cl. 452 (1964). However, subsequent claims for refunds in which the same issues are raised as in the first claim cannot extend the two-year period for bringing suit. 18th Street Leader Stores, Inc. v. United States, 142 F.2d 113, 115 (7th Cir.), cert. denied, 323 U.S. 725, 65 S.Ct. 61, 89 L.Ed. 583 (1944); Einson-Freeman Co. v. Corwin, 112 F.2d 683 (2d Cir.), cert. denied, 311 U.S. 693, 61 S.Ct. 75, 85 L.Ed. 449 (1940). Generally, the limitation period for instituting a civil action runs from the rejection of the first claim.

The plaintiff argued in its "Memorandum in Opposition to Defendant's Motion for Partial Dismissal" that because the first claim was "sketchy and incomplete" and because it failed to comply with the regulations of the Internal Revenue Service which require the grounds for the claim to be set forth in detail, the claim must be considered a nullity. This argument has been accepted by at least one court. In W. A. Schemmer Limestone Quarry, Inc. v. United States, 240 F.Supp. 356 (S.D.Iowa 1964), the court held that because the first claim filed was deficient in detail, it was a nullity and the statute of limitations could only begin to run upon the disallowance of the second claim which fully stated the grounds for refund.

However, the court's examination of the law and fact circumstances of this case indicates that the statute of limitations properly began to run when the Secretary disallowed plaintiff's first claim. Even though that claim was incomplete and failed to comply with the regulations that require specificity and detail, the court finds that it was fully considered by the Secretary and disallowed on its merits. Moreover, the parties to this law suit understood, or reasonably should have understood, that the Secretary examined the merits of plaintiff's first claim despite technical noncompliance with the Secretary's regulations.

The purpose behind the IRS regulations requiring specificity in refund claims is to inform the IRS of the basis of the taxpayer's claims so that the merits of the claims may be considered. Because the regulations are designed for the benefit and convenience of the IRS, the Commissioner may insist on technical compliance with the regulations or waive compliance and proceed to the determination of the merits of the claim. Angelus Milling Co. v. Commissioner, 325 U.S. 293, 65 S.Ct. 1162, 89 L.Ed. 1619 (1945); Ford v. United States, 402 F.2d 791 (6th Cir. 1968). Thus, if it is clear that the Commissioner's...