Ertman v. U.S.

• Decision Date: 27 January 1999
• Docket Number: Docket No. 97-6237
• Citation: 165 F.3d 204
• Parties: -733, 99-1 USTC P 50,226 David F. ERTMAN and Jane Ertman, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

Page 204

165 F.3d 204

83 A.F.T.R.2d 99-733, 99-1 USTC P 50,226

David F. ERTMAN and Jane Ertman, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.

Docket No. 97-6237.

United States Court of Appeals, Second Circuit.

Argued Dec. 15, 1998.

Decided Jan. 27, 1999.

Brian P. Daniels, Brenner, Saltzman & Wallman LLP, New Haven, Conn., for Plaintiffs-Appellants David F. Ertman and Jane Ertman.

Annette M. Wietecha, Tax Division, Department of Justice, Washington, D.C. (Loretta C. Argrett, Assistant Attorney General, and Gilbert S. Rothenberg, Tax Division, Department of Justice, and John H. Durham, United States Attorney, District of Connecticut, on the brief), for Defendant-Appellee United States of America.

Before: FEINBERG, CALABRESI, and SOTOMAYOR, Circuit Judges.

CALABRESI, Circuit Judge:

Plaintiffs-Appellants David and Jane Ertman appeal from a decision of the United States District Court for the District of Connecticut (Peter C. Dorsey, Chief Judge ) granting summary judgment to the Defendant-Appellee United States of America and denying the Ertmans' motion for summary judgment. See Ertman v. United States, 972 F.Supp. 706 (D.Conn.1997). The district court held that the Ertmans' suit, which sought a refund of income taxes allegedly overpaid in 1988 and 1989, was time-barred because the Ertmans did not ask for a refund until 1994. See id. at 709. In so doing, the court rejected the Ertmans' contention that the limitations period for refund claims set forth at 26 U.S.C. § 6511(b)(2)(A) did not preclude their action because the remittances from which they requested a refund were deposits rather than payments. See id. at 708. We affirm.

I. BACKGROUND

On April 15, 1988, the Ertmans, who are husband and wife, filed with the federal Internal Revenue Service ("IRS") a Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) requesting an extension of time to file their 1987 income tax return. With their Form 4868 the Ertmans included a check for $11,000. The IRS granted them a four-month extension and then, upon the Ertmans' request, an additional two-month extension, thereby delaying the filing deadline to October 1988. On April 15, 1989, the Ertmans sent another Form 4868, this time accompanied by a check for $49,000, asking for an extension with respect to their 1988 tax return. Just as it had in 1988, the IRS granted them a four-month extension and then another two-month extension, postponing the deadline until October 1989.

The Ertmans did not finally file their tax returns for 1987 and 1988 until April 1994. In their returns, they claimed combined overpayments between the two years of $53,655. The returns indicated that the Ertmans wanted the overpayments applied to other tax liabilities. In March 1995, the IRS notified the Ertmans that it had denied their request for a refund of their overpaid 1987 and 1988 taxes because the couple had filed their refund claims more than three years after the dates that their returns were due.

The Ertmans subsequently filed this action in the District of Connecticut seeking a refund of their overpaid taxes. Their complaint contended that their refund claim was not time-barred because the checks that they had sent to the IRS in 1988 and 1989 were merely deposits and not payments. According

to the complaint, the remittances did not become tax payments until April 1994, when the Ertmans filed their tax returns for the relevant years. The Ertmans and the government filed cross-motions for summary judgment. On August 1, 1997, the district court granted summary judgment to the government. See id. at 709.

DISCUSSION

We review de novo a district court's decision to grant summary judgment. See Ayers v. Ryan, 152 F.3d 77, 80 (2d Cir.1998). "Summary judgment is proper if, viewing all facts of record in a light most favorable to the non-moving party, no genuine issue of material fact remains for adjudication." Samuels v. Mockry, 77 F.3d 34, 35 (2d Cir.1996) (per curiam).

The Internal Revenue Code sets forth two jurisdictional time bars for tax refund claims. Section 6511(a) provides that a refund claim must be submitted "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." 26 U.S.C.A. § 6511(a) (1989 & Supp.1998). Even if a refund claim satisfies this requirement, however, § 6511(b)(2)(A) contains a so-called "look-back" provision that limits the taxpayer's recovery to "the portion of the tax paid within the period, immediately preceding the filing of the claim, equal to 3 years plus the period of any extension of time for filing the return." Id. § 6511(b)(2)(A). The application of the look-back provision to the Ertmans' refund claim constitutes the crux of this appeal.

The government asserts that the district court correctly found that § 6511(b)(2)(A) precludes the Ertmans from recovering money remitted in 1988 and 1989, because the Ertmans did not claim a refund from those remittances until they filed their 1987 and 1988 tax returns in 1994--more than three years after the date that their returns were due. The Ertmans counter that the checks submitted with their Forms 4868 were merely deposits at the time they were made in 1988 and 1989 and did not become payments until 1994, when the Ertmans defined their tax liabilities by filing their returns.

The distinction between tax deposits and payments on which the Ertmans rely originated with Rosenman v. United States, 323 U.S. 658, 65 S.Ct. 536, 89 L.Ed. 535 (1945), in which the Supreme Court held that a claim for a refund from a remittance made as a "deposit" rather than as a "payment" was not time-barred by the predecessor to § 6511. See id. at 663, 65 S.Ct. 536. Based on its evaluation of the circumstances in the case before it--specifically, (1) the timing of the remittance and the disputed IRS assessment (which came years later), (2) the plaintiffs' intent in making the remittance, and (3) how the IRS treated the remittance upon receipt--the Court concluded that the remittance at issue in that case was a deposit. See id. at 661-663, 65 S.Ct. 536.

Two circuits, the Fifth and the Eighth, have interpreted Rosenman to establish a "per se" test that treats a remittance as a payment for purposes of the statute of limitations on refund claims only when the actual tax that is due has been determined. See United States v. Dubuque Packing Co., 233 F.2d 453, 460 (8th Cir.1956) (holding that a remittance is not a payment until the filing of the tax return, or an assessment by the IRS, defines the taxpayer's liability); Thomas v. Mercantile Nat'l Bank, 204 F.2d 943, 944 (5th Cir.1953) (same). At least five other circuits, however, have rejected the "per se" test. See New York Life Ins. Co. v. United States, 118 F.3d 1553, 1556-57 (Fed.Cir.1997), cert. denied, --- U.S. ----, 118 S.Ct. 1559, 140 L.Ed.2d 792 (1998); Moran v. United States, 63 F.3d 663, 667-68 (7th Cir.1995); Ewing v. United States, 914 F.2d 499, 503 (4th Cir.1990); Ameel v. United States, 426 F.2d 1270, 1273 (6th Cir.1970); Fortugno v. Commissioner, 353 F.2d 429, 435-36 (3d Cir.1965). Furthermore, subsequent decisions of both the Fifth and the Eighth Circuits have called the test into question. See Ford v. United States, 618 F.2d 357, 359-61 (5th Cir.1980) (criticizing the "per se" test but applying it because the panel of the court was without power to overrule or disregard the holding of Mercantile National Bank ); Essex v. Vinal, 499 F.2d 226, 229-30 (8th Cir.1974) (ignoring Dubuque Packing Co. and holding that the plaintiff's remittance conveyed to the IRS along with an application for an extension of the deadline for filing a return, was a payment because the plaintiff intended it as a payment of taxes and the IRS treated it as a payment).

Having rejected the "per se" test, various circuits have construed Rosenman as suggesting that courts look to the facts and circumstances of an individual case to determine whether a remittance is a deposit or a payment. See New York Life Ins. Co., 118 F.3d at 1557; Moran, 63 F.3d at 667-68; Ewing, 914 F.2d at 503; Ameel, 426 F.2d at 1272-73; Fortugno, 353 F.2d at 435-36. Following language in Rosenman, these courts classify a remittance as a payment or a deposit based on three factors: (1) the timing of the assessment or definition of the tax liability; (2) the taxpayer's intent with respect to the remittance; and (3) the IRS's treatment of the remittance upon receiving it. See, e.g., Moran, 63 F.3d at 668; Ewing, 914 F.2d at 503.

At first blush, it would appear that the "facts and circumstances" test would generally require a trial to make the fact-specific inquiry that the test entails. And yet a significant number of courts (including courts in jurisdictions that have expressly adopted the "facts and circumstances" test, see, e.g., Gabelman v. Commissioner, 86 F.3d 609, 612 (6th Cir.1996)) have held that certain types of remittances can categorically be deemed payments. See, e.g., United States v. Miller, 315 F.2d 354, 358-59 (10th Cir.1963) (holding that a remittance of estimated income tax becomes a payment on the date that the declaration of estimated income tax was filed); Hill v. United States, 263 F.2d 885, 887 (3d Cir.1959) (holding that a remittance made in conjunction with the submission of a tax return is ordinarily a payment rather than a deposit).

We believe that in cases in which, unlike Rosenman, the Internal Revenue Code explicitly defines a particular type of remittance as a payment, a factual inquiry is unnecessary to determine whether a remittance is a payment or a deposit, ¹ for in such cases the statutory delineation dominates over the circumstances of the particular remittance at issue. Section 6513(b)(2) of the Internal Revenue Code contains just such a definition. It provides that "[a]ny amount paid as estimated income tax for any taxable year shall...