Koopmann v. United States

• Decision Date: 30 September 2020
• Docket Number: No. 09-cv-333 T,09-cv-333 T
• Parties: WILLIAM KOOPMANN, et al., Plaintiffs, v. THE UNITED STATES, Defendant.
• Court: U.S. Claims Court

WILLIAM KOOPMANN, et al., Plaintiffs, v. THE UNITED STATES, Defendant.

No. 09-cv-333 T

United States Court of Federal Claims

September 30, 2020

William C. Brashear, Jr., Dawsonville, Georgia, Plaintiff pro se

Jason Bergmann, U.S. Department of Justice, Tax Division, Court of Federal Claims Section, Washington, D.C., for the Defendant.

MEMORANDUM AND ORDER

Plaintiff pro se, William C. Brashear, Jr. seeks a tax refund in the amount of $2,631.45 which he claims he overpaid as a "result of United Airlines canceling [his] pension plan." Plaintiff's Administrative Claim (Pl. Admin. Cl.) at 3 (ECF No. 113); see also Defendant's Answer (Def. Ans.) ¶ 5 (ECF No. 112).

Defendant moved to dismiss Plaintiff's complaint pursuant to Rule 12(b)(1) of Rules of the United States Court of Federal Claims (Rule(s)) or, in the alternative, for summary judgment pursuant to Rule 56. See generally Defendant's Motion to Dismiss for Lack of Subject Matter Jurisdiction or, in the Alterative, for Summary Judgment with Respect to Plaintiff Brashear (Def. Mot.) (ECF No. 114); Def. Reply (ECF No. 118). Defendant argues that Mr. Brashear's tax-refund claim is time-barred under Internal Revenue Code (I.R.C.) § 6511, because Brashear did not file an administrative claim for tax refund either within three years of filing of the applicable tax return or within two years of payment of the tax. Def. Mot. at 7-10; see Def. Reply at 7-10. Defendant also argues that Brashear's claims are barred by the equitable-recoupment doctrine, because any refund to which he may be entitled in the 2000 tax year is less than the Federal Insurance Contributions Act (FICA) taxes he would owe in 2001-2005. Def. Mot. at 10-13; see also Def. Reply at 4-5. Finally, Defendant argues that the Internal Revenue Service (IRS) properly applied FICA tax to Brashear's compensation under United Airlines' non-qualified deferred compensation plan and that this issue has been resolved by the Federal Circuit's decision in Balestra v. United States, 803 F.3d 1363 (Fed. Cir. 2015). See Def. Mot. at 13, 19; Def. Reply at 1-4.

Mr. Brashear cross-moved for summary judgment. See generally "Plaintiffs' Cross Motion and Opposition to Defendant's Motion to Dismiss or for Summary Judgement with Respect to Plaintiff Brashear." (Pl. Mot.) (ECF No. 117); Pl. Reply (ECF No. 119). Mr. Brashear does not dispute that his refund claim was not filed within three years of the filing of the relevant return, nor within two years of the payment of the taxes he seeks refunded. See generally Pl. Mot. & Pl. Reply. Rather, Mr. Brashear argues that it is violative of the Due Process Clause of the Fifth Amendment to apply a statute of limitations to bar a refund request when the event that triggered the purported eligibility for that refund --- the discharge of United Airlines' obligation to make payments towards his non-qualified retirement benefits --- did not occur until long after the statute of limitations had run. See Pl. Mot. at 1-5; Pl. Reply at 2-4. Additionally, Mr. Brashear continues to argue, despite the Federal Circuit's Balestra decision to the contrary, that the Treasury Department's application of the special timing rule, which does not does not allow for "the contingency that if the employer became bankrupt, an adjustment in the employee's tax would be made," violates Congress' directive as well as the Fifth Amendment's Due Process Clause. See Pl. Mot. at 5-12; Pl. Reply at 4-14; but see Balestra, 803 F.3d at 1371.

This case was transferred to the undersigned judge on April 10, 2020. See ECF No. 135. On May 7, 2020, this Court held a status conference and asked whether the parties wished to supplement their motions given the passage of time from when they originally filed their motions in 2017, before the prior judge. Transcript of May 7, 2020 Status Conference (ECF No. 219) (Transcript) at 10-13. Both parties declined. See id. & ECF No. 200. This Court has considered each of the parties' filings and arguments in ruling on the parties' motions. For the reasons set forth below, this Court GRANTS Defendant's Motion to Dismiss, alternatively GRANTS Defendant's Motion for Summary Judgment, and DENIES Plaintiff's Cross-Motion for Summary Judgment.

BACKGROUND

The Federal Insurance Contributions Act (FICA), I.R.C. §§ 3101-3128, establishes a tax that is assessed by the Government based on wages paid to workers, and the money collected from the FICA tax is used to fund the Social Security and Hospital Insurance (HI). Generally, wages are received when they are paid by the employer to the employee, and wages are paid by the employer when they are actually or constructively paid. See 26 C.F.R. § 31.3121(a)-2. The same rule is generally true for FICA tax purposes. See Balestra v. United States, 803 F.3d 1363, 1366 (Fed. Cir. 2015) (citing 26 C.F.R. § 31.3121(v)(2)-1(a)(1) (the "special timing rule")). However, some wages are treated differently under the "special timing rule" for FICA tax purposes. Id. The special timing rule applies to wages received from a non-qualified deferred compensation plan, such as the plan at issue in the present action. See Balestra, 803 F.3d at 1366 (internal citations and quotations omitted).¹ Under the "special timing rule" FICA tax is assessed only once, at thelater of either: (A) the date services are performed or (B) the date when there is no substantial risk of forfeiture of the rights to such amount. See 26 C.F.R. § 31.3121(v)(2)-1(a)(1) (tracking I.R.C. § 3121(v)(2)(A)). There is "no substantial risk of forfeiture," if

an amount deferred is considered reasonably ascertainable on the first date on which the amount, form, and commencement date of the benefit payments attributable to the amount deferred are known, and the only actuarial or other assumptions regarding future events or circumstances needed to determine the amount deferred are interest and mortality.

26 C.F.R. § 31.3121(v)(2)-1(e)(4)(i)(B). The deferred benefits are taxed at their "present value," which is computed with reference to actuarial projections concerning life expectancy and a discount rate which accounts for the time value of money but does not account for the risk of employer default. See 26 C.F.R. § 31.3121(v)(2)-1(c)(2)(ii); Balestra, 803 F.3d at 1371.

The underlying facts of this case are undisputed. In 2000, Mr. Brashear retired. Pl. Admin. Cl. at 8; Def. Ans. ¶ 3. Mr. Brashear was covered by United Airlines' non-qualified deferred compensation plan. Pl. Admin. Cl. at 6. Pursuant to the special timing rule, Mr. Brashear paid the present value of his FICA taxes the year in which he retired. Pl. Admin. Cl. at 6, 8. Mr. Brashear received benefits under United Airlines' non-qualified deferred compensation plan from 2001 through 2005. See Def. Ans. ¶ 16. The hospital insurance tax was 1.45% of an individual's "wages" received with respect to employment. Pl. Admin. Cl. at 6.

On December 9, 2002, two years after Plaintiff's retirement, United Airlines filed a Chapter 11 bankruptcy petition. Def. Ans. ¶ 13. In 2006, the Seventh Circuit Court of Appeals approved United Airlines' reorganization plan. Def. Ans. ¶ 13; see also In re UAL Corp., 468 F.3d 444 (7th Cir. 2006). As a result of these proceedings, United Airlines' obligation to pay Plaintiff's deferred compensation was discharged, with a portion of Mr. Brashear's benefits never having been paid.Pl. Admin. Cl. at 4. Mr. Brashear, however, had already been taxed on the full amount of benefits under the plan he was expected to receive. Specifically, Mr. Brashear paid tax on $348,136.83 worth of non-qualified deferred compensation, of which he received only $166,657.17. Pl. Admin. Cl. at 5-6, 9-13. He paid $5,047.98 of FICA tax on these benefits, which reflects the 1.45% HI tax rate applied to the $348,136.83 present value of the benefits. Pl. Admin. Cl. at 5; Def. Ans. ¶ 14.

On January 24, 2007, United Airlines informed Mr. Brashear that it would not pursue a tax refund for FICA taxes paid at the present value of Pilot Non-Qualified Plan Payments. Pl. Admin. Cl. at 7. Brashear filed his own administrative claim for refund, on IRS Form 843, "claim for Refund and Request for Abatement," on June 4, 2007. Pl. Admin. Cl. at 3-14; Def. Ans. ¶ 4. Mr. Brashear's refund claim purported to relate to the tax period from "04/28/2001 to 09/30/2005." Pl. Admin. Cl. at 3. However, attachments to the refund indicate that Brashear was seeking a refund of FICA tax on "the present value of [his] accrued supplemental plan benefit" that United Airlines had included in the "2000 FICA wages from United" reported for Mr. Brashear. Pl. Admin. Cl. at 6.

On May 26, 2009, another retired United pilot, William Koopmann, filed a lawsuit in the United States Court of Federal Claims against the United States seeking, inter alia, a refund of the FICA taxes paid by United relating to his retirement.² Mr. Koopmann purported to represent over 160 other retired United pilots, including Mr. Brashear. Mr. Brashear did not sign the Koopmann complaint. Instead, under a previous judge overseeing this case, on September 3, 2009, Mr. Brashear completed a "Plaintiff Information Sheet," which incorporated Mr. Koopmann'scomplaint by reference. See ECF No. 60 at 3. The gravamen of Mr. Brashear's claim is that because United Airlines withheld FICA tax from Mr. Brashear based on a present value calculation of his retirement benefits at the time of his retirement, Mr. Brashear effectively paid Hospital Insurance (HI) wage tax on wages he will never receive. Specifically, Mr. Brashear states that he should have paid the 1.45% HI tax on the present value of $166,657.17 (the amount he received), which he claims would entitle him to a $2,631.45 tax refund. Pl. Admin. Cl. at 5.

DISCUSSION

Pursuant to Rules 12(b)(1) and 12(h)(3), this Court must dismiss claims that do not fall within its subject-matter jurisdiction. When considering a motion to dismiss based on lack of subject-matter jurisdiction, this...