Koopmann v. United States

• Decision Date: 11 April 2022
• Docket Number: 2021-1329
• Parties: WILLIAM KOOPMANN, WILLIAM C. BRASHEAR, Plaintiffs-Appellants v. UNITED STATES, Defendant-Appellee CHARLES M. ADAMS, ET AL., Plaintiffs
• Court: U.S. Court of Appeals — Federal Circuit

WILLIAM KOOPMANN, WILLIAM C. BRASHEAR, Plaintiffs-Appellants CHARLES M. ADAMS, ET AL., Plaintiffs v. UNITED STATES, Defendant-Appellee

No. 2021-1329

United States Court of Appeals, Federal Circuit

April 11, 2022

This disposition is nonprecedential.

Appeal from the United States Court of Federal Claims in No 1:09-cv-00333-EMR, Judge Eleni M. Roumel.

William Koopmann, Lovettsville, VA, pro se.

William Brashear, Dawsonville, GA, pro se.

Janet A. Bradley, Tax Division, United States Department of Justice, Washington, DC, for defendant-appellee. Also represented by Jacob Earl Christensen, Michael J. Haungs David A. Hubbert.

Before Lourie, Reyna, and Chen, Circuit Judges.

PER CURIAM

This is a tax refund case. Appellants William C. Brashear and William Koopmann (collectively, "Appellants") sued the government in the United States Court of Federal Claims ("the Claims Court") alleging that they are entitled to a refund of Federal Insurance Contribution Act ("FICA") taxes that were paid on deferred compensation that they never received. The Claims Court dismissed their claims. Koopmann v. United States 150 Fed.Cl. 299 (2020) ("Brashear Decision"); Koopmann v. United States, 150 Fed.Cl. 290 (2020) ("Koopmann Decision"). For the reasons provided below, we affirm the decisions of the Claims Court.

Background

Appellants Brashear and Koopmann are retired United Airlines employees. Brashear retired in 2000 and was covered by United Airlines' non-qualified deferred compensation ("NQDC") plan for payment of retirement benefits. Koopmann retired in 2001 and was similarly covered. Under the plan, Brashear and Koopmann expected to receive compensation each year for the duration of their lives.

This case relates to FICA taxes that Brashear and Koopmann paid on compensation that they expected to receive under the United Airlines NQDC retirement plan. The Internal Revenue Code ("I.R.C."), codified in Title 26 of the United States Code, is the body of statutory law that governs the issues in this case. Also relevant are the regulations promulgated by the United States Department of the Treasury ("Treasury Department").

Normally for purposes of FICA taxes, wages are considered received when they are paid by an employer to an employee, and wages are considered paid by the employer when they are actually or constructively paid. See Balestra v. United States, 803 F.3d 1363, 1366 (Fed. Cir. 2015) (citing 26 C.F.R. § 31.3121(a)-2 and 26 C.F.R. § 31.3121(v)(2)-1(a)(1)). "However, some wages-including the deferred compensation at issue here-are treated differently under the 'special timing rule' for FICA tax purposes." Id. (citing § 31.3121(v)(2)-1(a)(2)).

The special timing rule, which is set forth in I.R.C. § 3121(v)(2), governs the timing of when "[a]ny amount deferred under a nonqualified deferred compensation plan shall be taken into account" as wages for FICA tax purposes. 26 U.S.C. § 3121(v)(2)(A). Under the special timing rule, an amount deferred is taken into account as wages for FICA tax purposes at some time before the actual payment of the compensation, and "shall not thereafter be treated as wages." 26 U.S.C. § 3121(v)(2)(B). Pursuant to the Treasury Department's regulations, the "amount deferred" is defined in terms of the "present value" of the deferred compensation, which is computed with reference to actuarial projections concerning life expectancy and a discount rate to account for the time value of money. See 26 C.F.R. § 31.3121(v)(2)-1(c)(2)(i).

The regulations set forth rules that govern the practicalities of this special timing rule. For example, there are rules that govern how and when the present value of the deferred compensation is to be calculated, how and when FICA taxes are to be withheld by an employer from an employee, and how and when the FICA taxes are to be paid and reported to the I.R.S. This court has in previous cases gone into more detail regarding this special timing rule and the regulations that govern it. See, e.g., Balestra, 803 F.3d at 1366 (analyzing the meaning of "present value" under the regulations). But, importantly, in this case Appellants do not challenge the applicability of the special timing rule itself, nor do they dispute that United Airlines complied with the special timing rule when it withheld FICA taxes from them, paid those FICA taxes on their behalf, and reported the FICA taxes to the IRS. It is therefore unnecessary to delve further into the language of the special timing rule in I.R.C. § 3121(v)(2) or the intricacies of its practical application.

For purposes of the instant appeal, it is sufficient to understand that under the special timing rule FICA taxes are paid up front on money that is expected to be received in the future. As the special timing rule was applied in this case, FICA taxes were withheld and paid on deferred compensation that Koopmann and Brashear expected to receive in periodic payments for years to follow. Specifically, for Brashear, United Airlines withheld and paid $5, 047.98 in FICA taxes, which represented 1.45% (the then-applicable statutory FICA tax rate) of the $348, 136.83 calculated present value of his deferred compensation retirement benefits. See S. Appx. 211. For Koopmann, United Airlines withheld and paid $6, 017.88 in FICA taxes based on the $415, 025.91 calculated present value of his deferred compensation. See S. Appx. 341.

Brashear and Koopmann never received much of that deferred compensation because United Airlines filed a Chapter 11 bankruptcy petition in 2002. Under a reorganization plan, which the Seventh Circuit Court of Appeals approved in 2006, United Airlines' obligation to pay deferred compensation to Brashear and Koopmann-and to many other similarly situated retired employees-was discharged. Thus, a portion of the retirement benefits that Brashear and Koopmann expected to receive-money on which FICA taxes had already been paid-was never paid to them.

On June 4, 2007, Brashear filed an administrative claim for refund at the Internal Revenue Service ("IRS") on IRS Form 843, purportedly relating to the tax period "from 04/28/2001 to 09/30/2005." S. Appx. 208. Koopmann filed his administrative claim on August 5, 2007 purportedly relating to the tax period "from 1/1/06 to 12/31/06." S. Appx. 339. Attachments to both Brashear's and Koopmann's refund claims made clear that they were seeking refunds for excess FICA taxes that were paid at the time of their retirements based on the then-present value of their deferred compensation. See S. Appx. 209-10, 340. The IRS denied their refund claims.

On May 26, 2009, Koopmann filed a lawsuit against the United States in the Claims Court. S. Appx. 97-113. As described by the Claims Court:

The gravamen of Mr. Koopmann's claim is that because United Airlines withheld FICA tax from Mr. Koopmann based on a present value calculation of his retirement benefits at the time of his retirement, Mr. Koopmann effectively paid [Hospital Insurance] wage tax on wages he will never receive.

Koopmann Decision, 150 Fed.Cl. at 294.

Koopmann's complaint began by listing dozens of plaintiffs, all of whom were described as "retired career employees of United Airlines that belong to an online fraternal group, Retired United Pilots (RETUP), an online Message Board organization." See S. Appx. 97. Koopmann was the only plaintiff, however, who signed the complaint.

On July 27, 2009, the government moved for a more definite statement and requested that the court strike all purported plaintiffs other than Koopmann. In response to that motion, Koopmann obtained and submitted what he styled "Plaintiff Information" sheets from many of the plaintiffs. See S. Appx. 128-88. Each Plaintiff Information sheet contained basic contact information for the plaintiff, including address, email address, and phone number. Id. Each Plaintiff Information sheet also included certain limited information relevant to the specific plaintiff's refund claim, including the tax year for which the FICA tax claim was filed, the date and place the refund claim was filed, the amount claimed, and the IRS claim number. Id. The Plaintiff Information sheet concluded with the plaintiff's signature, immediately below the statement: "I have read the Complaint, Motions and Answers and those are my allegations." Id. Brashear submitted one such Plaintiff Information sheet on September 3, 2009. Brashear Decision, 150 Fed.Cl. at 303.

The government moved to dismiss both Brashear's and Koopmann's claims for lack of jurisdiction. On September 30, 2020, the Claims Court granted the government's motions against Brashear and Koopmann on the basis that they had not filed timely refund claims. The court's decision with respect to each plaintiff was based on the "well-established rule that a timely sufficient claim for a [tax] refund is a jurisdictional prerequisite to a refund suit." Koopmann Decision, 150 Fed.Cl. at 294 (quoting Greene v. United States, 191 F.3d 1341, 1343 (Fed. Cir. 1999)).^[1]

The Claims Court relied on a number of provisions of the Internal Revenue Code, including most importantly I.R.C. § 6511(a), which sets forth the time limitations for filing a federal tax refund claim:

Claim for credit or refund of an overpayment of any tax imposed by this title in respect of which tax the taxpayer is required to file a return shall be filed by the taxpayer 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, or if no return was filed by the taxpayer, within 2 years from the time the tax was paid.

See 26 U.S.C. § 6511(a). The court summarized this law by stating that a refund claim "must be filed either: within three years of filing the return; or within two...