Bartimmo v. U.S., Civil Action No. H-06-1317.
| Decision Date | 30 November 2007 |
| Docket Number | Civil Action No. H-06-1317. |
| Citation | 525 F.Supp.2d 879 |
| Parties | Ernest E. BARTIMMO, et al., Plaintiffs, v. UNITED STATES of America, Defendant. |
| Court | U.S. District Court — Southern District of Texas |
Teresa Jean Womack, Redding and Associates, Houston, TX, for Plaintiffs.
Michael D. Powell, United States Department of Justice, Dallas, TX, for Defendant.
Pending before the Court are Plaintiffs Ernest E. Bartimmo and Estelle L. Bartimmo's Motion for Summary Judgment (Document No. 22) and Defendant United States of America's Motion for Summary Judgment (Document No. 20). Having considered the motions, submissions, and applicable law, the Court determines Plaintiffs' motion should be granted, and Defendant's cross-motion should be denied.
Plaintiffs Ernest and Estelle Bartimmo seek tax refunds from Defendant United States of America ("the Government") in the amount of $24,551.66 in penalty interest assessed by the Internal Revenue Service ("IRS") under Internal Revenue Code ("IRC") § 6621(c) for tax years 1983 and 1984.1 In 1983 and 1984, Plaintiff Ernest Bartimmo ("Dr. Bartimmo") was a limited partner in Dillon Oil Technology Partners ("Dillon Oil"), part of a group of partnerships known as the Elektra partnerships.2 Accordingly, Plaintiffs included a $43,935 loss from Dillon Oil on their 1983 joint federal income tax return, and a $48,454 loss on their 1984 joint federal income tax return.3 In 1986, it appeared the IRS might question the amount of loss allocated by Dillon Oil to Dr. Bartimmo. Consequently, Plaintiffs filed amended income tax returns for 1983 and 1984, reducing the partnership losses they initially claimed by an amount that equaled the difference between the losses reported in 1983 and 1984 and Dr. Bartimmo's cash contributions to Dillon Oil in 1983 and 1984.4 As a result, Plaintiffs increased their taxable income by $31,250 for 1983 and $35,954 for 1984. Thus, paying more taxes based on their amended tax returns, Plaintiffs paid the IRS tax and accrued interest of $20,724 for 1983 and $21,215 for 1984.
Nevertheless, the IRS audited Dillon Oil's 1983 and 1984 partnership information returns and issued Notices of Final Partnership Administrative Adjustment ("FPAA") that disallowed Dillon Oil's partnership deductions reported on its 1983 and 1984 information returns. Both the 1983 FPAA and 1984 FPAA (collectively, "the FPAAs") disallowed Dillon Oil's 1983 and 1984 partnership deductions on multiple, alternative grounds — some of which were tax-motivated transactions and some of which were not — without assigning discrete dollar adjustments to specific grounds.
Subsequently, a Dillon Oil partner, acting on behalf of the partnership as a tax matters partner, filed two petitions in the United States Tax Court ("Tax Court"), one challenging the IRS's proposed blanket adjustments contained in the 1983 FPAA and one challenging the IRS's proposed blanket adjustments in the 1984 FPAA.5 The Tax Court cases disputing the FPAAs were styled Vulcan, Oil Tech. Partners, et al. v. Comm'r, 110 T.C. 153, 1998 WL 96462 (1998) (collectively, "the Vulcan Oil cases").6
On June 13, 2002, the Tax Court granted the IRS's motions to dismiss the Vulcan Oil cases for lack of prosecution and entered Orders of Dismissal (the "Dismissal Orders"). The Dismissal Orders restated the IRS's proposed blanket adjustments in the FPAAs. Based on the Tax Court's Dismissal Orders, the IRS proceeded to adjust Plaintiffs' tax liabilities in accordance with the proposed adjustments in the FPAAs. On December 18, 2002, the IRS mailed Plaintiffs a Form 4549A-CG that reflected the IRS's adjustments to Plaintiffs' 1983 and 1984 income tax liabilities. Because the IRS determined that Dillon Oil had overstated their deductions in 1983 and 1984, the IRS charged Plaintiffs with underpayment of taxes. Moreover, because the IRS determined that Plaintiffs' underpayment of tax was attributable to tax-motivated transactions, the IRS penalized Plaintiffs by calculating the interest on their 1983 and 1984 taxes under the tax-motivated interest rate in IRC § 6621(c) ("tax-motivated interest rate").7 The IRS assessed tax-motivated interest against Plaintiffs in the amount of $13,124.92 for 1983 and tax-motivated interest in the amount of $11,427.74 for 1984. On June 11, 2003, Plaintiffs remitted full payment to the IRS.
On June 8, 2005, Plaintiffs filed separate Claims for Refund and Requests for Abatement for 1983 and 1984 with the IRS, requesting refunds of the tax-motivated interest assessed against them. Because the IRS failed to respond to this claim, Plaintiffs filed their complaint in this Court on April 17, 2006, averring the IRS erroneously assessed tax-motivated interest against them.
Plaintiffs contend they are entitled to summary judgment and a refund in the amount of $24,551.66 because it was improper and erroneous as a matter of law for the IRS to impose tax-motivated interest against them. In response, the Government moves for summary judgment, arguing the Court lacks subject matter jurisdiction over this action because Plaintiffs failed to timely file their refund claim with the IRS, or alternatively, that Plaintiffs' claims are barred by res judicata. Thus, the Court must determine whether it has subject matter jurisdiction over the parties' dispute, and if so, whether the IRS properly assessed tax-motivated interest against Plaintiffs.
Summary judgment is mandated "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Initially, the movant bears the burden of demonstrating to the court that there is an absence of a genuine issue of any material fact. Id. at 323, 106 S.Ct. 2548. The burden then shifts to the party who bears the burden of proof on the claims on which summary judgment is sought to present evidence beyond the pleadings to show there is a genuine issue for trial. Id. at 324, 106 S.Ct. 2548. Summary judgment should only be granted when the entire record shows that no genuine issue of Material fact exists. Anderson v. Liberty Lobby, 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).8
A genuine issue for trial exists when Id at 249-50, 106 S.Ct. 2505. Conclusory allegations unsupported by specific facts will not prevent an award of summary judgment; the plaintiff cannot rest on his allegations to get to a jury without any significant probative evidence tending to support the complaint. See Nat'l Ass'n of Gov't Employees v. City Pub. Serv. Bd., 40 F.3d 698, 713 (5th Cir. 1994). It is not the function of the court to search the record on the non-movant's behalf for evidence which may raise a fact issue. Topalian v. Ehrman, 954 F.2d 1125, 1137 n. 30 (5th Cir.1992).
The Government asserts it is entitled to summary judgment as a matter of law for two reasons. First, the Government contends the Court lacks subject matter jurisdiction over Plaintiffs' refund claims because they were not timely filed with the IRS. According to the Government, Plaintiffs' refund claims are controlled by a six-month statute of limitations, and because Plaintiffs' claims were filed with the IRS more than six months after the statute of limitations began to run, their claims are barred. Alternatively, the Government argues it is entitled to summary judgment because Plaintiffs' claims are barred by res judicata based upon the Tax Court's dismissal of the Vulcan Oil cases. Thus, the Court must determine whether subject matter jurisdiction exists over Plaintiffs' claims.
Plaintiffs carry the burden of proving subject matter jurisdiction is proper. McGann v. United States, 76 Fed.Cl. 745, 749 (2007) (citing McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936)). The United States, as sovereign, is immune from suit. United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 85 L.Ed. 1058 (1941). However, the United States has consented to suits by taxpayers' in the district courts for the refund of any sum of federal tax alleged to have been excessive or wrongfully collected under the internal revenue laws. Weisbart v. U.S. Dep't of Treasury, 222 F.3d 93, 94 (2d Cir.2000). "Because tax refund suits are actions in which the sovereign has waived its immunity and consented to be sued, statutory provisions governing such suits are strictly construed." Alexander v. United States, 829 F.Supp. 199, 200-01 (N.D.Tex.1993). Where the requirements of the waiver of sovereign immunity have not been satisfied, a court lacks subject matter jurisdiction, and the action must be dismissed. Koehler v. United States, 153 F.3d 263, 265 (5th Cir.1998).
To overcome sovereign immunity in a tax refund action, a taxpayer must file a claim for refund with the IRS within the time limits established by the IRC. United States v. Dalm, 494 U:S. 596, 602, 110 S.Ct. 1361, 108 L.Ed.2d 548 (1990). A taxpayer's failure to timely file a claim for a refund with the IRS deprives the district court of subject matter jurisdiction. Gustin v. United States, 876 F.2d 485, 488 (5th Cir.1989); see also Sun Chem. Corp. v. United States, 698 F.2d 1203, 1206 (Fed. Cir.1983) (). Thus, the Court must determine whether Plaintiffs timely filed their claims for refund with the IRS.
The parties dispute the appropriate limitations period to apply to Plaintiffs'...
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