Little People's School, Inc. v. U.S., 87-1484
| Decision Date | 04 November 1987 |
| Docket Number | No. 87-1484,87-1484 |
| Citation | 842 F.2d 570 |
| Parties | -931, 88-1 USTC P 9298, 45 Ed. Law Rep. 1017, Unempl.Ins.Rep. CCH 21,892 LITTLE PEOPLE'S SCHOOL, INC., Plaintiff, Appellee, v. UNITED STATES of America, Defendant, Appellant. . Heard |
| Court | U.S. Court of Appeals — First Circuit |
Teresa E. McLaughlin, Tax Div., Dept. of Justice, with whom Michael L. Paup and Robert S. Pomerance, Tax Div., Dept. of Justice, Michael C. Durney, Acting Asst. Atty. Gen., Washington, D.C., and Frank L. McNamara, Jr., Acting U.S. Atty., Boston, Mass., were on brief, for defendant, appellant.
Floyd H. Anderson with whom Goldstein, Burkin, Wennett and Carter, Boston, Mass., was on brief, for plaintiff, appellee.
Before CAMPBELL, Chief Judge, BREYER and TORRUELLA, Circuit Judges.
The district court entered summary judgment against the United States in a suit brought by a taxpayer to recover erroneously paid federal unemployment taxes. The government appeals.
The taxpayer and appellee in this case is The Little People's School, Inc., a Massachusetts corporation that operates a school for deaf and aphasic children. As a non-profit corporation, the school is exempt from federal income and unemployment taxes, see 26 U.S.C. Sec. 501(c)(3) (1982), and is, therefore, not required to file returns for such taxes. Nevertheless, it mistakenly paid $13,816.72 in unemployment taxes for the tax years 1978-1981. On June 20, 1985, the school filed claims with the Internal Revenue Service for a refund of these payments. The IRS disallowed the claims as untimely; they were received after the expiration of the period for filing administrative refund claims that is provided by section 6511(a) of the Internal Revenue Code, 26 U.S.C. Sec. 6511(a) (1982). In September 1986 the school brought this action in federal district court against the United States, seeking to recover its erroneous payments. The government moved to dismiss the action, arguing that the school's failure to have filed its administrative refund claim on time deprived the district court of jurisdiction. The district court denied the government's motion, ruling that the limitations period for filing refund claims with the Treasury set out in Code section 6511(a) was inapplicable and did not have to be observed. The court ruled that the taxpayer's civil action could proceed--except with respect to taxes paid before June 20, 1979--since it had been commenced within the six years allowed generally for the bringing of "civil actions against the United States." 28 U.S.C. Sec. 2401(a) (1982). The court subsequently granted the school's motion for summary judgment.
At issue in this appeal is whether the limitations period in section 6511(a) for filing refund claims with the Treasury applies to this taxpayer. 1 That section provides,
Period of Limitation on filing 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 two 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. Claim for credit or refund of an overpayment of any tax imposed by this title which is required to be paid by means of a stamp shall be filed by the taxpayer within three years from the time the tax was paid.
26 U.S.C. Sec. 6511(a) (1982) (emphasis added). The dispute here focuses on the meaning of the underscored prepositional phrase in the provision's first sentence, "in respect of which tax the taxpayer is required to file a return." The district court ruled that the effect of this language is to restrict the application of section 6511(a)'s first sentence to refund claims filed by taxpayers who in fact are required to file a return for the particular tax they claim to have overpaid. Because The Little People's School was exempt from unemployment taxes, and thereby not required to file a return, the court ruled that the timeliness of its administrative refund claim was not governed by section 6511(a).
The government makes a host of arguments on appeal. Its principal contention is that the district court erred by construing the first sentence of section 6511(a) in isolation, ignoring the structure and purpose of section 6511(a) itself, and of this section in context with related Code provisions. The government claims that the two sentences comprising section 6511(a), read together, reflect a division of the universe of administrative refund claims into (1) claims for taxes payable by return and (2) claims for taxes payable by stamp. Since unemployment taxes are payable by return, not by stamp, refunds for overpayments thereof are governed by the limitations set forth in the first sentence of section 6511(a). The government acknowledges that its understanding of the disputed phrase is obtained by reading it as if "the" were "a," to wit, "in respect of which tax a taxpayer is required to file a return."
While conceding that section 6511(a) "accommodates" the district court's interpretation, the government submits that only its own construction is plausible when the section is read in context with other Code provisions. It points particularly to section 7422(a), which we discuss more extensively below. In brief, the government argues that since section 7422(a) establishes an administrative refund claim as a prerequisite to bringing a civil suit for a tax refund, it only makes sense to interpret the limitations in section 6511(a) as pertaining to all such refund claims. The government also maintains that the district court's construction of section 6511(a) undermines the proper function of a statute of limitations, namely, dismissing stale claims without regard to their substantive merit. Because the district court's construction would require a court in a refund suit to make a preliminary inquiry into whether the plaintiff-taxpayer were required to file a return--an inquiry often tantamount to an inquiry into the claim's merits--the court's interpretation is said to subvert the effective operation of section 6511(a). In addition to these two arguments, the government also asserts that its proposed interpretation of section 6511(a) is supported by the statute's legislative history, the Treasury regulation promulgated thereunder, the text of the precursor statute, and the rule that statutes waiving sovereign immunity must be strictly construed.
The position of The Little People's School is simple. Section 6511(a) "could not be clearer." The section sets administrative limitations periods for only two categories of refund claims: claims for overpayments of taxes for which the taxpayer (i.e., the very taxpayer in question) is required to file a return, and claims for overpayments of taxes payable by stamp. The statute simply does not speak to the situation where a taxpayer overpays taxes when it is not, itself, required to file a return. The school rests its case on the "obvious" difference between "the" and "a," noting that while Congress might have enacted a different limitations statute--perhaps one more in accordance with the government's notions of administrative convenience and reasonableness--it did not. In support of its position, the school invokes numerous judicial renditions of the so-called "plain meaning rule."
Doubtless, the most "natural" meaning of the first sentence of section 6511(a), read in isolation, is the one urged upon us by The Little People's School. However, the provision can also be read as the government urges, and that reading is far more plausible in light of the rest of the Tax Code.
The school's position suffers from interpreting a single sentence in isolation. A court must always interpret a statutory provision with reference to its context within the statute itself. The process by which legislation becomes binding law is not a piecemeal one; statutes are not passed sentence by sentence, or clause by clause. It follows that a court's interpretation of a single provision necessitates consideration of the statute in its entirety, deriving the meaning of a part from the whole of the words and phrases that the legislature declared to be the law. In view of this principle we are persuaded, notwithstanding our regard for the plain meaning rule and its able champion in this case, that the government's interpretation of section 6511(a) is correct.
To establish the relevant statutory context, we turn to section 7422 of the Code, the concern of which is unambiguously declared in its title, "Civil actions for refund." Subsection (a) thereunder is entitled, with equal certainty, "No suit prior to filing claim for refund." That subsection provides in relevant part,
No suit prior to filing claim for refund.--No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax ... until a claim for refund or credit has been duly filed with the Secretary or his delegate, according to the provisions of law in that regard, and the regulations of the Secretary or his delegate established in pursuance thereof.
26 U.S.C. Sec. 7422(a) (1982). This provision admits of...
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