Arch Engineering Co., Inc. v. U.S.

• Decision Date: 11 February 1986
• Docket Number: No. 85-2307,85-2307
• Citation: 783 F.2d 190
• Parties: -1178, 86-1 USTC P 9275 ARCH ENGINEERING COMPANY, INC., Appellant, v. The UNITED STATES, Appellee. Appeal
• Court: U.S. Court of Appeals — Federal Circuit

Page 190

783 F.2d 190

57 A.F.T.R.2d 86-1178, 86-1 USTC P 9275

ARCH ENGINEERING COMPANY, INC., Appellant, v. The UNITED STATES, Appellee.

Appeal No. 85-2307.

United States Court of Appeals, Federal Circuit.

Feb. 11, 1986.

Robert M. Entwisle, III of Miller & Entwisle, Pittsburgh, Pa., argued for appellant.

Kathryn Rooklidge, of the Tax Div., Dept. of Justice, Washington, D.C., argued for appellee. With her on brief were Glenn L. Archer, Jr., Asst. Atty. Gen., Michael L. Paup and Robert A. Bernstein, Attys.

Before DAVIS, BALDWIN and SMITH, Circuit Judges.

DAVIS, Circuit Judge.

The Internal Revenue Code makes the proper filing of a refund claim with the Internal Revenue Service (IRS) a mandatory prerequisite to any tax refund suit in court (26 U.S.C. Sec. 7422(a)) and provides that such a refund claim must be filed within three years from the time the return was filed or two years from the payment of the tax, whichever is later (26 U.S.C Sec. 6511(a)). In this instance, the formal refund claims for the involved tax years 1975-1977 were filed after these dates. The problem is whether the limitation period declared by Sec. 6511(a), supra, was nevertheless met, tolled, or deferred by certain documents or circumstances on which appellant relies. The Claims Court held not, and we affirm.

I.

Appellant Arch Engineering Company is the successor of both Pearson Manufacturing Company, Inc. (Pearson) and Pittsburgh Metals Fabricating Company (Pittsburgh) which paid the taxes now sought to be recovered in this suit in the Claims Court. In 1978 the IRS decided that Pearson and Pittsburgh were members of one controlled group of four corporations and were therefore collectively entitled to one surtax exemption. Because the income tax return for the four corporations had been prepared as if they involved two controlled groups with one exemption for each group, IRS determined that additional taxes were due by Pearson and Pittsburgh, and so notified them on December 4, 1978. After protest ¹ and execution of certain documents--to be described in the next two paragraphs of this opinion--Pearson paid its alleged deficiencies on September 21, 1979 (for 1975) and September 27, 1979 (for 1976 and 1977). Pittsburgh, after similar protest, paid its deficiencies on October 25, 1979.

These payments were made according to settlements (between IRS and the two taxpayers) under which two IRS forms were executed. On August 1, 1979, Pearson executed IRS Form 870-AD ("Offer of Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and of Acceptance of Overassessment") in which Pearson agreed to pay the assessed deficiencies while preserving its right to file a formal refund claim with respect to its surtax exemption protest. This objective was accomplished by the following language (drafted by taxpayer and accepted by IRS) added to the back of Form 870-AD:

All other conditions contained in this waiver do not in any way estop or bar taxpayer from filing timely claims for refund (refund claims) or a timely suit for refund in court (refund suit) to recover those portions of the tax deficiencies to which taxpayer hereby agrees to the extent that said tax deficiencies in part are based on the denial of multiple surtax exemptions * * *. Taxpayer shall have the right to file said timely refund claims and initiate said timely refund suit as though this waiver had not been signed or executed by taxpayer and Commissioner, with neither Commissioner nor United States of America having the right to raise this waiver as a basis for refusing said timely refund claims or opposing said timely refund suit founded on said refund claims if the defense is that the execution of this waiver by taxpayer had the legal effect of estopping or barring a recovery of taxes founded on said refund claims or said refund suit.

This offer of a waiver of restrictions is not to be construed as a claim for refund or credit, formal or informal, concerning the matters for which the right to file a claim is reserved. (Emphasis added.)

On the same day (August 1, 1979), Pittsburgh executed IRS Form 870 ("Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment") which contains the following in its printed text:

NOTE: If you consent to the assessment of the deficiencies shown in this waiver, please sign and return the form in order to limit any interest charge and expedite the adjustment to your account. Your consent will not prevent you from filing a claim for refund (after you have paid the tax) if you later believe you are so entitled; nor prevent us from later determining, if necessary, that you owe additional tax; nor extend the time provided by law for either action.

If you later file a claim and the Service disallows it, you may file suit for refund in a district court or in the United States Court of Claims, but you may not file a petition with the United States Tax Court.

In January 1982, the Supreme Court decided United States v. Vogel Fertilizer Co., 455 U.S. 16, 102 S.Ct. 821, 70 L.Ed.2d 792, accepting in general the same position that these taxpayers had followed in defining the membership of their control group (and, thus, the amount of surtax exemption). As a result, on November 15, 1982, Pearson and Pittsburgh filed formal refund claims for the disallowed surtax tax exemptions. IRS denied these claims as untimely, and this suit was begun...