EC Term of Years Trust v. United States

• Citation: 2007 I.R.B. 986,75 BNA USLW 4304,127 S.Ct. 1763,550 U.S. 429,167 L.Ed.2d 729
• Decision Date: 30 April 2007
• Docket Number: No. 05–1541.,05–1541.
• Parties: EC TERM OF YEARS TRUST, Petitioner, v. UNITED STATES.
• Court: United States Supreme Court

550 U.S. 429

2007-46 I.R.B. 986

127 S.Ct. 1763

167 L.Ed.2d 729

75 BNA USLW 4304

EC TERM OF YEARS TRUST, Petitioner,

v.UNITED STATES.

No. 05–1541.

Supreme Court of the United States

Argued Feb. 26, 2007.

Decided April 30, 2007.

Syllabus^*

Under 26 U.S.C. § 7426(a)(1), if the Internal Revenue Service (IRS) levies upon a third party's property to collect taxes owed by another, the third party may bring a wrongful levy action against the United States, so long as such action is brought before “the expiration of 9 months from the date of the levy,” § 6532(c)(1). In contrast, the limitations period for a tax-refund action under 28 U.S.C. § 1346(a)(1) begins with an administrative claim that may be filed within at least two years, and may be brought to court within another two years after an administrative denial. The IRS levied on a bank account in which petitioner (Trust) had deposited funds because the IRS assumed that the Trust's creators had transferred assets to the Trust to evade taxes. The bank responded with a check to the Treasury. Almost a year later, the Trust and others brought a § 7426(a)(1) action claiming wrongful levies, but the District Court dismissed the complaint because it was filed after the 9–month limitations period had expired. After unsuccessfully pursuing a tax refund at the administrative level, the Trust filed a refund action under § 1346(a)(1). The District Court held that a wrongful levy claim under § 7426(a)(1) was the sole remedy possible and dismissed, and the Fifth Circuit affirmed.

Held: The Trust missed § 7426(a)(1)'s deadline for challenging a levy, and may not bring the challenge as a tax-refund claim under § 1346(a)(1). Section 7426(a)(1) provides the exclusive remedy for third-party wrongful levy claims. “[A] precisely drawn, detailed statute pre-empts more general remedies,” Brown v. GSA, 425 U.S. 820, 834, 96 S.Ct. 1961, 48 L.Ed.2d 402, and it braces the preemption claim when resort to a general remedy would effectively extend the limitations period for the specific one, see id., at 833, 96 S.Ct. 1961. If third parties could avail themselves of § 1346(a)(1)'s general tax-refund jurisdiction, they could effortlessly evade § 7426(a)(1)'s much shorter limitations period. The Trust argues that, becauseUnited States v. Williams, 514 U.S. 527, 115 S.Ct. 1611, 131 L.Ed.2d 608, construed § 1346(a)(1)'s general jurisdictional grant expansively enough to cover third parties' wrongful levy claims, treating § 7426(a)(1) as the exclusive avenue for these claims would amount to a disfavored holding that § 7426(a)(1) implicitly repealed § 1346(a)(1)'s pre-existing jurisdictional grant. But this reads Williams too broadly. Williams involved a lien and was decided on the specific understanding that no other remedy was open to the plaintiff. Here, the Trust challenges a levy and could have made a timely claim under § 7426(a)(1). Even if the presumption against implied repeals applied here, § 7426(a)(1)'s 9–month limitations period cannot be reconciled with the notion that the same challenge would be open under § 1346(a)(1) for up to four years. Nor can the two statutory schemes be harmonized by construing § 7426(a)(1)'s filing deadline to cover only those actions seeking predeprivation remedies unavailable under § 1346(a)(1). On its face, § 7426(a)(1) applies to predeprivation and postdeprivation claims alike. Pp. 1767 – 1769.

434 F.3d 807, affirmed.

SOUTER, J., delivered the opinion for a unanimous Court.

Francis S. Ainsa, Jr., El Paso, TX, for petitioner.

Deanne E. Maynard, Washington, DC, for respondent.

Francis S. Ainsa, Jr., Ainsa Hutson, L.L.P., Attorneys at Law, El Paso, TX, for Petitioner.

Paul D. Clement, Solicitor General, Counsel of Record, Eileen J. O'Connor, Assistant Attorney General, Thomas G. Hungar, Deputy Solicitor General, Deanne E. Maynard, Assistant to the Solicitor General, Bruce R. Ellisen, Teresa T. Milton, Attorneys Department of Justice, Washington, D.C., for respondent.

Justice SOUTER delivered the opinion of the Court.

This is a challenge to the Internal Revenue Service's levy upon the property of a trust, to collect taxes owed by another, an action specifically authorized by 26 U.S.C. § 7426(a)(1), but subject to a statutory filing deadline the trust missed. The question is whether the trust may still challenge the levy through an action for tax refund under 28 U.S.C. § 1346(a)(1). We hold that it may not.

I

The Internal Revenue Code provides that “[i]f any person liable to pay any tax neglects or refuses to pay the same after demand, the amount ... shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.” 26 U.S.C. § 6321. “A federal tax lien, however, is not self-executing,” and the IRS must take “[a]ffirmative action ... to enforce collection of the unpaid taxes.” United States v. National Bank of Commerce, 472 U.S. 713, 720, 105 S.Ct. 2919, 86 L.Ed.2d 565 (1985). One of its “principal tools,” ibid., is a levy, which is a “legally sanctioned seizure and sale of property,” Black's Law Dictionary 926 (8th ed.2004); see also § 6331(b) (“The term ‘levy’ as used in this title includes the power of distraint and seizure by any means”).

To protect against a “ ‘[w]rongful’ ” imposition upon “property which is not the taxpayer's,” S.Rep. No. 1708, 89th Cong., [127 S.Ct. 1766]2d Sess., 30 (1966), the Federal Tax Lien Act of 1966 added § 7426(a)(1), providing that “[i]f a levy has been made on property ... any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in ... such property and that such property was wrongfully levied upon may bring a civil action against the United States in a district court.” 80 Stat. 1143. The action must, however, be brought before “the expiration of 9 months from the date of the levy.” ¹§ 6532(c)(1). This short limitations period contrasts with its counterpart in a tax-refund action under 28 U.S.C. § 1346(a)(1), which begins with an administrative claim that may be filed within at least two years, and may be brought to court within another two after an administrative denial.² The demand for greater haste when a third party contests a levy is no accident; as the Government explained in the hearings before passage of the Act, “[s]ince after seizure of property for nonpayment of taxes [an IRS] district director is likely to suspend further collection activities against the taxpayer, it is essential that he be advised promptly if he has seized property which does not belong to the taxpayer.” Hearings on H.R. 11256 and H.R. 11290 before the House Committee on Ways and Means, 89th Cong., 2d Sess., 57–58 (1966) (written statement of Stanley S. Surrey, Assistant Secretary of the Treasury); see also id., at 72 (statement of Laurens Williams, Chairman, Special Committee on Federal Liens, American Bar Association) (“A short (9 month) statute of limitations is provided, because it is important to get such controversies decided quickly so the Government may pursue the taxpayer's own property if it made a mistake the first time”).

II

After Elmer W. Cullers, Jr., and Dorothy Cullers established the EC Term of Years Trust in 1991, the IRS assessed federal tax liabilities against them for what the Government claimed (and the Trust does not dispute, see Tr. of Oral Arg. 7) were unwarranted income tax deductions in the 1980s. The Government assumed that the Cullerses had transferred assets to the Trust to evade taxes, and so filed a tax lien against the Trust in August 1999. The Trust denied any obligation, but for the sake of preventing disruptive collection efforts by the IRS, it deposited funds in a bank account, against which the IRS issued a notice of levy to the bank in September 1999. In October, the bank responded with a check for over $3 million to the United States Treasury.

Almost a year after that, the Trust (joined by several other trusts created by the Cullerses) brought a civil action under 26 U.S.C. § 7426(a)(1) claiming wrongful levies, but the District Court dismissed it because the complaint was filed after the 9–month limitations period had expired, see § 6532(c)(1). The court also noted that tax-refund claims under 28 U.S.C. § 1346(a)(1) were not open to the plaintiff trusts because § 7426 “ ‘affords the exclusive remedy for an innocent third party whose property is confiscated by the IRS to satisfy another person's tax liability.’ ” BSC Term of Years Trust v. United States, 2001–1 USTC ¶ 50,174, p. 87,237, n. 1, 87 AFTR 2d ¶ 2001–390, p.2001–547, n. 1, 2000 WL 33155870 (WD Tex.2000) (quoting Texas Comm. Bank–Fort Worth, N.A. v. United States, 896 F.2d 152, 156 (C.A.5 1990); emphasis deleted). At first the Trust sought review by the Court of Appeals for the Fifth Circuit, but then voluntarily dismissed its appeal. BSC Term of Years Trust v. United States, 87 AFTR 2d ¶ 2001–1039, p.2001–2532 (2001).

After unsuccessfully pursuing a tax refund at the administrative level, the Trust filed a second action, this one for a refund under § 1346(a)(1). The District Court remained of the view that a claim for a wrongful levy under § 7426(a)(1) had been the sole remedy possible and dismissed.³ The Court of Appeals for the Fifth Circuit affirmed.

Because the Ninth Circuit, on the contrary, has held that § 7426(a)(1) is not the exclusive remedy for third parties challenging a levy, see WWSM Investors v. United States, 64 F.3d 456 (1995), we granted certiorari to resolve the conflict, 549 U.S. 990, 127 S.Ct. 467, 166 L.Ed.2d 333 (2006). We affirm.

III

“In a variety of contexts the Court has held that a precisely drawn, detailed statute pre-empts more general remedies.” Brown v. GSA, 425 U.S. 820, 834, 96 S.Ct. 1961, 48 L.Ed.2d 402 (1976); see Block v. North Dakota ex rel. Board of Univ. and School Lands, 461 U.S. 273, 284–286, 103 S.Ct. 1811, 75 L.Ed.2d 840 (1983) (adverse claimants to real...