Rothkamm v. United States

• Decision Date: 21 September 2015
• Docket Number: No. 14–31164.,14–31164.
• Citation: 802 F.3d 699
• Parties: Kathryn ROTHKAMM, Plaintiff–Appellant v. UNITED STATES of America; Internal Revenue Service, Defendants–Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

802 F.3d 699

Kathryn ROTHKAMM, Plaintiff–Appellant

v.UNITED STATES of America; Internal Revenue Service, Defendants–Appellees.

No. 14–31164.

United States Court of Appeals, Fifth Circuit.

Sept. 21, 2015.

John Fredrick McDermott, Michael Sean Walsh, Taylor, Porter, Brooks & Phillips, L.L.P., Baton Rouge, LA, for Plaintiff–Appellant.

John Arthur Schumann, Michael J. Haungs, Esq., Supervisory Attorney, U.S. Department of Justice, Washington, DC, John Joseph Gaupp, Esq., Assistant U.S. Attorney, U.S. Attorney's Office, Baton Rouge, LA, for Defendants–Appellees.

Appeal from the United States District Court for the Middle District of Louisiana.

Before JOLLY, HIGGINBOTHAM, and DAVIS, Circuit Judges.

Opinion

W. EUGENE DAVIS, Circuit Judge:

Plaintiff–Appellant Kathryn Rothkamm and her husband filed separate tax returns. Rothkamm's husband incurred a tax liability, and the IRS levied her account at a bank, which she asserts was her separate property. She initially sought a Taxpayer Assistance Order (“TAO”) through the Taxpayer Advocate Service but obtained no relief. She then filed an administrative claim and, when that was denied, filed this suit for wrongful levy. The IRS filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) on the ground that the suit was untimely under the applicable nine-month statute of limitations and had not been tolled by her TAO application. The district court concluded that Rothkamm was not a “taxpayer” for purposes of the TAO statute, 26 U.S.C. § 7811, and that, even if she was, § 7811(d) would not toll the running of the statute of limitations in this case. Accordingly, the district court dismissed for lack of subject matter jurisdiction. Rothkamm appealed, arguing both that she is a “taxpayer” under section 7811 and that the nine-month statute of limitations was tolled by her TAO application. For the reasons set forth below, we agree on both grounds and therefore reverse and remand.

I. BACKGROUND

Plaintiff–Appellant Kathryn Rothkamm and Defendants–Appellees United States of American and the Internal Revenue Service (collectively the “Government” or “IRS”) agree on the relevant facts, as the district court set out below:

Rothkamm is the owner of a certificate of deposit maintained in an account at IberiaBank, located at 7325 Highland Road, Baton Rouge, Louisiana. On March 6, 2012 the Internal Revenue Service (“IRS”) issued to IberiaBank a Notice of Levy for Rothkamm's account to satisfy certain tax liabilities of Kathryn's husband, Chester J. Rothkamm, Jr. Thereafter, on April 18, 2012, IberiaBank remitted to the IRS the full contents of Rothkamm's account, consisting of $73,360.41.

Less than two weeks later, on April 30, 2012, Rothkamm attempted to challenge the IRS's levy by filing an application for assistance with the Taxpayer Advocate Service (“TAS”). On October 11, 2012, having determined that it “was unable to provide any assistance to [Rothkamm],” the TAS “closed” Rothkamm's case.

Still seeking relief, on May 15, 2013 Rothkamm filed with the IRS an administrative claim for wrongful levy pursuant to 26 U.S.C. § 6343(b). The IRS denied Rothkamm's claim on July 1, 2013. Finally, on September 6, 2013, Rothkamm sued the IRS for wrongful levy in this Court, pursuant to 26 U.S.C. § 7426. On November 8, 2013, the Government filed the motion to dismiss that is the subject of this Order.¹

Rothkamm filed this suit for wrongful levy under 26 U.S.C. § 7426(a)(1), which provides:

(1) Wrongful levy. —If a levy has been made on property or property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States in a district court of the United States. Such action may be brought without regard to whether such property has been surrendered to or sold by the Secretary.²

Section 7426(i) provides that the nine-month statute of limitations in 26 U.S.C. § 6532(c) applies; this period may be tolled by filing an administrative claim for return of the wrongfully levied property under 26 U.S.C. § 6343(b).³

As the district court explained, the IRS levied Rothkamm's account on April 18, 2012. Thus, the general statute of limitations would have expired on January 18, 2013, absent any tolling. Rothkamm's administrative wrongful levy claim, which she filed on May 15, 2013, would toll the running of the statute of limitations if filed within the statute of limitations. Thus, the core question is whether, as Rothkamm contends, the statute of limitations was tolled while her application for a TAO was pending before the TAS. If so, her administrative claim under § 6343(b) would also have been timely, and the statute of limitations for filing suit would have been suspended until January 1, 2014, months after this suit was filed on September 6, 2013.”⁴ The district court summarized the key question and the parties' arguments as follows:

To the extent that it is not already clear, the parties concede that the dispositive issue is whether Rothkamm's April 30, 2012 application for assistance to the TAS tolled the 9–month period of limitations for filing her wrongful levy suit. Rothkamm insists that her application to the TAS stopped the clock on her wrongful levy claim because she “is able to use the suspension of the statute of limitations provided by [26 U.S.C. § ] 7811(d).” The Government disagrees, arguing: (1) 26 U.S.C. affords relief to “taxpayer[s]” and, as it relates to this case, Rothkamm “is not a taxpayer under any definition because she was not subject to a tax”; and (2), even if Rothkamm is a taxpayer within the meaning of section 7811, she is not entitled to tolling pursuant to section 7811(d) because “the suspensions of the statute of limitations periods [described there] are for IRS actions, not taxpayer [actions][.]”⁵

The district court therefore concluded that Rothkamm was not a “taxpayer” for purposes of the TAO statute, 26 U.S.C. § 7811, and even if she was, the statute could not toll the running of the statute of limitations.⁶ Thus, the district court concluded that it had no subject matter jurisdiction to hear Rothkamm's claim against the IRS, granted the IRS's motion to dismiss, and dismissed Rothkamm's suit with prejudice. Rothkamm appealed.

II. Standard of Review

We review the district court's dismissal for lack of subject matter jurisdiction under Rule 12(b)(1) de novo.⁷ The central question is whether Congress intended to waive sovereign immunity under these particular circumstances. The Supreme Court has “said on many occasions that a waiver of sovereign immunity must be ‘unequivocally expressed’ in statutory text.”⁸

Legislative history cannot supply a waiver that is not clearly evident from the language of the statute. Any ambiguities in the statutory language are to be construed in favor of immunity ... so that the Government's consent to be sued is never enlarged beyond what a fair reading of the text requires. Ambiguity exists if there is a plausible interpretation of the statute that would not authorize money damages against the Government.⁹

Nevertheless,

Although this canon of interpretation requires an unmistakable statutory expression of congressional intent to waive the Government's immunity, Congress need not state its intent in any particular way. We have never required that Congress use magic words. To the contrary, we have observed that the sovereign immunity canon “is a tool for interpreting the law” and that it does not “displac[e] the other traditional tools of statutory construction.” Richlin Security Service Co. v. Chertoff, 553 U.S. 571, 589, 128 S.Ct. 2007, 170 L.Ed.2d 960 (2008). What we thus require is that the scope of Congress' waiver be clearly discernable from the statutory text in light of traditional interpretive tools. If it is not, then we take the interpretation most favorable to the Government.¹⁰

In this case, we conclude the district court erred in determining the definition of “taxpayer” under § 7811 by failing to supply the Internal Revenue Code's generally applicable definition set out in § 7701 ; and the court further erred in its interpretation of § 7811(d)'s tolling provision by failing to follow the plain language of the statute and associated regulations.

III. Analysis

A. Applicable Law

Resolution of this appeal turns on the TAO statute, 26 U.S.C. § 7811, which generally provides:

(a) Authority to issue. —

(1) In general. —Upon application filed by a taxpayer with the Office of the Taxpayer Advocate (in such form, manner, and at such time as the Secretary shall by regulations prescribe), the National Taxpayer Advocate may issue a Taxpayer Assistance Order if—

(A) the National Taxpayer Advocate determines the taxpayer is suffering or about to suffer a significant hardship [as defined in § 7811(a)(2) ] as a result of the manner in which the internal revenue laws are being administered by the Secretary; or

(B) the taxpayer meets such other requirements as are set forth in regulations prescribed by the Secretary.¹¹

Among other things, the statute provides for tolling of statutes of limitations during the pendency of an application for a TAO under certain circumstances; those provisions are discussed below.

The IRS has issued regulations for section 7811, found in 26 C.F.R. § 301.7811–1. Our interpretation is guided by the Supreme Court's two-step test set out in Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984) :

When a court reviews an agency's construction of the statute which it administers, it is confronted with two questions. First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent

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