Cheesecake Factory Inc. v. United States
| Decision Date | 03 July 2013 |
| Docket Number | No. 12-432 T,12-432 T |
| Parties | THE CHEESECAKE FACTORY INC., Plaintiff, v. THE UNITED STATES OF AMERICA, Defendant. |
| Court | U.S. Claims Court |
Granting Motion to Dismiss for
Lack of Jurisdiction; Claim for
Refund for Tax Year as to Which
Plaintiff Received a Notice of
Deficiency and Filed a Petition in
the Tax Court; I.R.C. § 6512(a)
L. Richard Walton, Marina del Rey, CA, for plaintiff.
Carl D. Wasserman, Attorney, with whom were Kathryn Keneally, Assistant Attorney General, and David I. Pincus, Chief, Court of Federal Claims Section, Tax Division, United States Department of Justice, Washington, DC, for defendant.
The Cheesecake Factory, Inc. (plaintiff) brings this suit seeking a refund of penalties and interest paid to the Internal Revenue Service (IRS) for its 2005 tax year in the amount of $432,280 (plus interest). See Compl. for Refund of Income Taxes (Complaint or Compl.), Docket Number (Dkt. No.) 1, ¶ 1; id. at 11.1 Plaintiff asserts thatit overpaid penalties and interest for its 2005 tax year because the United States (defendant or the government), acting through the IRS, "fail[ed] to properly credit prior year overpayments [to plaintiff's 2005 tax year]." See id. ¶ 1. The government has filed a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Rules of the United States Court of Federal Claims (RCFC) and for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6) of the RCFC. See The United States' Mot. to Dismiss Pl.'s Compl. Pursuant to RCFC 12(b)(1) & 12(b)(6) (defendant's Motion or Def.'s Mot.), Dkt. No. 13, at 1.2 The government argues that the court lacks jurisdiction "because plaintiff previously petitioned the United States Tax Court [(Tax Court)] for a determination of its tax liability for the 2005 tax[] year," id. , and that plaintiff has failed to state claim upon which relief can be granted because, "as a result of the Tax Court's adjudication of that petition, this suit is also barred by principles of res judicata," see id.
Now before the court are: plaintiff's Complaint, filed July 2, 2012; defendant's Motion, filed December 5, 2012; Plaintiff's Opposition to Defendant's Motion to Dismiss Pursuant to RCFC 12(b)(1) and 12(b)(6) (plaintiff's Response or Pl.'s Resp.), Dkt. No. 24, filed March 1, 2013; and The United States' Reply to Plaintiff's Opposition to the United States' Motion to Dismiss, Dkt. No. 29 (defendant's Reply or Def.'s Reply), filed April 29, 2013.
For the following reasons, defendant's Motion, to the extent that it seeks dismissal for lack of jurisdiction, is GRANTED and, to the extent that it seeks dismissal for failure to state a claim upon which relief can be granted, is DENIED as MOOT.
In August 2006 plaintiff filed a federal income tax return for its 2005 tax year, reporting that it owed taxes in the amount of $21,117,565. See Compl. ¶ 8; Def.'s Mot. 2 (). Payments and credits to plaintiff's 2005 tax year account totaled $18,167,100 so that, according to IRS records, plaintiff owed a balance of $2,950,465 on its self-assessed tax liability. See Def.'s Ex. 1 () 2. The payments and credits to plaintiff's account did not include plaintiff's claimed overpayment of $3,361,942 for the 2003 tax year, which plaintiff requested to have credited toward its 2005 tax liability on an amended 2003 tax return mailed on June 26, 2006. See Def.'s Ex. 2 (first amended 2003 return) 1 (providing, on line twelve, that plaintiff wanted $3,361,942 credited to 2005). On November 20, 2006 the IRS assessed plaintiff a tax deficiency of $2,950,465, a $132,770.92 penalty for failure to pay its taxes (failure-to-pay penalty) and $157,040.75 in interest. See Def.'s Ex. 1 () 2. The overpayment claimed by plaintiff on its first amended 2003 tax return appears to have been credited to plaintiff's account with interest on March 15, 2007. See id. ().
On June 14, 2007 plaintiff filed amended tax returns for 2003, 2004 and 2005 (collectively, the amended tax returns). See Def.'s Ex. 3 (second amended 2003 return); Def.'s Ex. 4 (amended 2004 return); Compl. Ex. A (amended 2005 return). According to defendant, the amended tax returns (in addition to plaintiff's first amended 2003 return) were filed in connection with an audit that included plaintiff's 2003, 2004 and 2005 tax years. See Def.'s Mot. 2-3. Among other changes, the amended tax returns reduced the amount of plaintiff's claimed 2003 overpayment by $395,143. See Def.'s Ex. 3 (second amended 2003 return) 1 (showing a self-assessed tax due in the amount of $395,143); see also Compl. Ex. A (amended 2005 return) 16 ( that plaintiff's overpayment carried forward from 2003 had been reduced by $395,143). Plaintiff also claimed an overpayment of $5,117,100 for its 2004 tax year on its amended 2004 return, which plaintiff requested to have credited toward its 2005 tax liability. Def.'s Ex. 4 (amended 2004 return) 1. The 2004 overpayment credit was retroactively applied to plaintiff's 2005 tax account.3 See Def.'s Ex. 1 () 2 (showing a 2004 overpayment credit in the amount of $5,117,100, applied on April 15, 2005).
Defendant states that the amended tax returns were reviewed as part of the audit process and that, "[a]t the conclusion of the examinations, the [IRS] accepted some of the bases for plaintiff's claims for refund[] and disallowed the others." Def.'s Mot. 3; see also Compl. Ex. B (notice of partial disallowance) 22 ( ). In the meantime, on October 1, 2007, the IRS had assessed plaintiff a second failure-to-pay penalty in the amount of $44,256.98 and a second interest charge of $98,210.70. Def.'s Ex. 1 () 4. The amounts assessed on November 20, 2006 and October 1, 2007 for failure-to-pay penalties and interest total $432,279.35, see Def.'s Ex. 1 () 2, 4 (showing assessments for failure-to-pay penalties and interest)--the $432,280 that plaintiff seeks to recover in this suit, see Compl. ¶¶ 7-8; id. at 11.
As a result of the audit, on July 2, 2009, the IRS issued a notice of deficiency to plaintiff with respect to its 2005 tax year. See Pl.'s Resp. 8-9. See generally Def.'s Ex. 5 (notice of deficiency). The notice of deficiency stated that plaintiff owed an additional $698,705 in taxes and a $138,741 accuracy-related penalty, unrelated to the previous assessments. See Def.'s Ex. 5 (notice of deficiency) 1, 3. The notice informed plaintiff, "If you want to contest this determination in court before making any payment, you have 90 days from the date of this letter . . . to file a petition with the United States Tax Court." Id. Accordingly, on October 5, 2009 plaintiff filed a petition with the Tax Court, seeking "a redetermination of the deficiency in tax and addition to tax [(also known as a penalty)] set forth by the Commissioner of [the IRS] in his Notice of Deficiency dated July 2, 2009." Def.'s Ex. 6 (Pet., Cheesecake Factory, Inc. v. Comm'r, No. 23591-09 (T.C. Oct. 5, 2009) (T.C. Pet.)) 1. Plaintiff's case in the Tax Court was resolved on August 26, 2010, when the Tax Court entered a decision stipulated by the parties, reducing plaintiff's tax deficiency for its 2005 tax year to $383,743 and eliminating the accuracy-related penalty. See Def.'s Ex. 7 1.
On October 28, 2010 plaintiff filed suit in the United States District Court for the Central District of California (California District Court), see generally Def.'s Ex. 8 (Compl., Cheesecake Factory, Inc. v. United States, No. 2:10-cv-08157 R (FFMx) (C.D. Cal. Oct. 28, 2010)), seeking a refund of taxes allegedly overpaid for its 2003 and 2004 tax years, "as well as related penalties and interest erroneously assessed and collected for [its 2005 tax year]," id. at 3. Plaintiff's case in the California District Court was resolved on December 16, 2011, when the California District Court dismissed the case pursuant to the parties' settlement agreement. See Compl. Ex. D (Order on Stipulation for Dismissal Without Prejudice to Refile until July 2, 2012, Cheesecake Factory, Inc. v. United States, No. 2:10-cv-08157 R (FFMx) (C.D. Cal. Dec. 16, 2011) 1. The parties' settlementagreement did "not include [plaintiff's] claim for refund arising from interest and late payment penalties assessed for the late payment of taxes due from [its] 2005 tax year," even though the claim was before the California District Court. Compl. Ex. C (letter from the IRS to plaintiff) 1 (regarding the settlement agreement). Instead, the IRS informed plaintiff that, although the IRS believed that plaintiff's "2005 claim was properly denied, in full," plaintiff could "still pursue this 2005 year claim in District Court by timely re-filing [its] suit." Id.
Plaintiff brought this suit seeking refund of the 2005 penalties and interest on July 2, 2012. See generally Compl.
Subject matter jurisdiction is a threshold matter that a court must determine at the outset of a case. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94-95 (1998); PODS, Inc. v. Porta Stor, Inc., 484 F.3d 1359, 1365 (Fed. Cir. 2007). Pursuant to the Tucker Act, the United...
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