Schaeffler v. United States

• Decision Date: 03 May 2018
• Docket Number: No. 17-10719,17-10719
• Citation: 889 F.3d 238
• Parties: Georg F. W. SCHAEFFLER; Bernadette Schaeffler, Plaintiffs–Appellants v. UNITED STATES of America, Defendant–Appellee
• Court: U.S. Court of Appeals — Fifth Circuit

889 F.3d 238

Georg F. W. SCHAEFFLER; Bernadette Schaeffler, Plaintiffs–Appellants

v.UNITED STATES of America, Defendant–Appellee

No. 17-10719

United States Court of Appeals, Fifth Circuit.

FILED May 3, 2018

Michael Todd Welty, Laura L. Gavioli, Counsel, Kristina Lynn Novak, Attorney, Mark P. Thomas, McDermott Will & Emery, L.L.P., Dallas, TX, for Plaintiff–Appellant GEORG F. W. SCHAEFFLER.

Michael Cavalier Durney, Independent Counsel, Law Offices of Michael C. Durney, Washington, DC, Richard Salgado, Esq., Dentons US, L.L.P., Dallas, TX, for Plaintiff–Appellant BERNADETTE SCHAEFFLER.

Norah Bringer, Richard Bradshaw Farber, Esq., Supervisory Attorney, U.S. Department of Justice, Tax Division, Appellate Section, Washington, DC, for Defendant–Appellee.

Before KING, HAYNES, and HIGGINSON, Circuit Judges.

KING, Circuit Judge:

Georg and Bernadette Schaeffler were previously married and filed a joint income tax return for the year 2002 on October 15, 2003. They later amended their 2002 tax return in April 2013 and claimed a refund for their overpayment. The Internal Revenue Service denied their claim as untimely. The Schaefflers then initiated this action, seeking the refund. The Government filed a motion to dismiss, arguing that the claim was filed after the general limitations period in I.R.C. § 6511(a) and that the special limitations period in I.R.C. § 6511(d)(3)(A) did not apply as the overpayment was not attributable to foreign taxes for which credit was allowed. The district court agreed with the Government that the refund claim was untimely and dismissed the suit. We AFFIRM.

I.

Georg and Bernadette Schaeffler were previously married and filed a joint income tax return for 2002 on October 15, 2003. Afterwards, they filed multiple amended returns for 2002. As relevant here, they filed a second amended return for 2002 on or around April 10, 2013. This return reflected two changes: a net decrease in foreign tax credit of $1,592,765 and an increase in minimum tax credit of $6,763,525. The net reduction in foreign tax credit resulted from three changes to their German tax liabilities: (1) an increase of $142,902 in German tax liabilities for an entity through which Mr. Schaeffler was conducting foreign rental activity; (2) an increase of $1,166,186 in German personal income tax liabilities; and (3) a decrease of $2,901,853 in German tax liabilities for a foreign partnership with which Mr. Schaeffler was involved.

The increase in minimum tax credit of $6,763,525 was due to changes made in the Schaefflers' third amended tax return for 2001. The original tax return for 2001 showed that they paid only a regular income tax. On or around April 7, 2012, they filed their third amended return for 2001. The revisions made in this return reflected a net increase in foreign tax credit of $5,621,448 and a reduction in minimum tax credit of $3,146,597. These changes resulted in the Schaefflers being subject to an alternative minimum tax in the amount of $2,474,851.¹ The Schaefflers alleged that the changes in the third amended return for 2001 "did not cause any additional tax liability or payments" for that year. Consequently, as reflected in the second amended return for 2002, the minimum tax credit for 2002 increased by $6,763,525—the sum of $2,474,851 (i.e., the minimum tax credit generated by the alternative minimum tax in 2001) and $4,288,674 (i.e., the minimum tax credit carried forward from years prior to 2001).²

The second amended return for 2002 showed that the net decrease in foreign tax credit of $1,592,765 absorbed a portion of the $6,763,525 increase in minimum tax credit, resulting in an overpayment of $5,170,760. The Schaefflers requested a refund for this overpayment. On January 6, 2014, the Internal Revenue Service ("IRS") denied their refund claim as untimely. On December 30, 2015, the Schaefflers initiated this action, seeking their refund for 2002. In its answer, the Government asserted that the court lacked subject matter jurisdiction because the refund claim was untimely. The district court ordered the Government to file a motion to dismiss so that the issue of jurisdiction could be addressed early in the litigation.

The Government complied and filed a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) on September 9, 2016. It argued that (1) the refund claim was subject to and filed after the limitations period in I.R.C. § 6511(a) and therefore untimely and (2) the overpayment was not attributable to the allowance of a foreign tax credit and so the special ten-year limitations period in § 6511(d)(3)(A) did not apply. The Schaefflers then filed an amended complaint with no major changes. On April 25, 2017, the district court dismissed the Schaefflers' refund claim, agreeing with the Government that the claim was untimely. The Schaefflers appealed.

II.

We review de novo a district court's dismissal under Rule 12(b)(1). See Lane v. Halliburton , 529 F.3d 548, 557 (5th Cir. 2008). "The district court [ ] has the power to dismiss for lack of subject matter jurisdiction on any one of three separate bases: (1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Williamson v. Tucker , 645 F.2d 404, 413 (5th Cir. May 1981). "In the instant case, the district court dismissed based upon the complaint and the undisputed facts evidenced in the record ...." Barrera–Montenegro v. United States , 74 F.3d 657, 659 (5th Cir. 1996). "[O]ur review is limited to determining whether the district court's application of the law is correct and, if the decision is based on undisputed facts, whether those facts are indeed undisputed." Williamson , 645 F.2d at 413.

This case involves statutory interpretation of the Internal Revenue Code, which is a matter of law that we review de novo. See Howard Hughes Co., L.L.C. v. Comm'r , 805 F.3d 175, 180 (5th Cir. 2015). We begin "by examining the plain language of the relevant statute." Stanford v. Comm'r , 152 F.3d 450, 455–56 (5th Cir. 1998) (citing G.M. Trading Corp. v. Comm'r , 121 F.3d 977, 981 (5th Cir. 1997) ). "In the absence of any ambiguity, our examination is confined to the words of the statute, which are assumed to carry their ordinary meaning." Id. at 456 (citing G.M. Trading , 121 F.3d at 981 ). "We are authorized to deviate from the literal language of a statute only if the plain language would lead to absurd results, or if such an interpretation would defeat the intent of Congress." Kornman & Assocs., Inc. v. United States , 527 F.3d 443, 451 (5th Cir. 2008) (first citing Lamie v. U.S. Tr ., 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004); then citing Johnson v. Sawyer , 120 F.3d 1307, 1319 (5th Cir. 1997) ). "Only after application of the principles of statutory construction, including the canons of construction, and after a conclusion that the statute is ambiguous may the court turn to the legislative history." Id. (quoting Carrieri v. Jobs.com, Inc. , 393 F.3d 508, 518–19 (5th Cir. 2004) ).

III.

There are two issues in this case: (1) whether the Schaefflers' refund claim for 2002 is timely under I.R.C. § 6511(d)(3)(A) because it relates to "an overpayment attributable to any taxes paid or accrued to any foreign country ... for which credit is allowed against [income] tax," and (2) whether the Schaefflers' refund claim for 2002 is timely under I.R.C. § 6511(a) because it was filed within two years from the time any tax for 2002 was paid. We first provide a legal background on time limitations for tax refund claims and then proceed to address the issues.

A.

"The United States, as sovereign, is immune from suit save as it consents to be sued." United States v. Sherwood , 312 U.S. 584, 586, 61 S.Ct. 767, 85 L.Ed. 1058 (1941). The United States has consented to be sued for "erroneously or illegally assessed or collected" taxes. 28 U.S.C. § 1346(a)(1). But the plaintiff must comply with the jurisdictional requirements in I.R.C. § 7422. See, e.g. , United States v. Clintwood Elkhorn Mining Co. , 553 U.S. 1, 4–5, 128 S.Ct. 1511, 170 L.Ed.2d 392 (2008). Such requirements for tax refund claims are set forth in § 7422(a). See id. Section 7422(a) states that no suit for improperly assessed or collected taxes shall be maintained "until a claim for refund ... has been duly filed with the Secretary." Section 6511 sets time limitations for the proper filing of a refund claim. See Duffie v. United States , 600 F.3d 362, 384 (5th Cir. 2010) ("To overcome sovereign immunity in a tax refund action, a taxpayer must file a refund claim with the IRS within the time limits established by the Internal Revenue Code."). A taxpayer's failure to comply with time limitations deprives the court of subject matter jurisdiction. See id.

Generally, a tax refund claim "shall be filed by the taxpayer 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." I.R.C. § 6511(a). Section 6511(b) defines two "look-back" periods, incorporating § 6511(a) by reference. Comm'r v. Lundy , 516 U.S. 235, 240, 116 S.Ct. 647, 133 L.Ed.2d 611 (1996). If the refund claim is filed within three years from the time the return was filed, then the refund "shall not exceed the portion of the tax paid within the [three-year] period, immediately preceding the filing of the [refund] claim, equal to 3 years plus the period of any extension of time for filing the return" ("three-year look-back period"). I.R.C. § 6511(b)(2)(A). If the refund claim is not filed within that three-year period, the refund "shall not exceed the portion of the tax paid during the 2 years immediately preceding the filing of the claim" ("two-year look-back period"). Id. § 6511(b)(2)(B).

Section 6511(d)(3) provides an exception to the general rule in § 6511(a). If the tax refund claim...