Paresky v. United States

• Decision Date: 15 August 2018
• Docket Number: No. 17-1275T,17-1275T
• Parties: DAVID S. PARESKY and LINDA K. PARESKY, Plaintiffs, v. UNITED STATES, Defendant.
• Court: U.S. Claims Court

DAVID S. PARESKY and LINDA K. PARESKY, Plaintiffs, v. UNITED STATES, Defendant.

No. 17-1275T

United States Court of Federal Claims

August 15, 2018

Taxpayers' claim for overpayment interest; invocation of I.R.C. §§ 6411, 6611(e); claim for overpayment interest not a claim for refund of tax; jurisdiction under the Tucker Act; 28 U.S.C § 1491(a)(1); statute of limitations; 28 U.S.C § 1501; split in the circuits over basis of claim to overpayment interest; transfer; 28 U.S.C § 1631

Laurin H. Mills, LeClairRyan, PC, Alexandria, VA, for plaintiffs. With him on the briefs were Elizabeth J. Atkinson, LeClairRyan, PC, Norfolk, VA, Edward L. Glazer, Goodwin Procter LLP, Boston, MA, and Nicole Hardin Brakstad, LeClairRyan, PC, Richmond VA.

Jason Bergmann, Trial Attorney, Tax Division, United States Department of Justice, Washington, DC, for defendant. With him on the briefs were Richard E. Zuckerman, Principal Deputy Assistant Attorney General, Tax Division, and David I. Pincus, Chief, Court of Federal Claims Section, United States Department of Justice, Washington, DC.

OPINION AND ORDER

LETTOW, Judge.

Plaintiffs, David and Linda Paresky, have filed suit seeking overpayment interest they contend they are owed on certain tax refunds they received stemming from losses incurred in 2008 and carried back to tax years 2003 through 2007. Compl. ¶¶ 4-6. Plaintiffs assert that they are entitled to overpayment interest on those refund amounts "because the refunds were not issued within 45 days of the filing of" the tax forms requesting the refunds. Compl. ¶ 6.¹ By plaintiffs' calculations, they are entitled to interest in the amount of $417,496.77 from April 15, 2009 through the dates on which the refunds were issued and interest on that interest continually accruing until eventual payment, which amount they calculate as totaling $118,099.18 as of September 15, 2017, the date plaintiffs filed suit. Compl. ¶ 29; Compl. Ex. I. The United States has moved to dismiss plaintiffs' complaint, asserting that plaintiffs' claims are time-barred as outside the six-year limitations period governing claims brought under the Tucker Act, 28 U.S.C. § 1491(a)(1). Def.'s Mot. to Dismiss for Lack of Subject Matter Jurisdiction ("Def.'s Mot."), at 1 (citing 28 U.S.C. § 2501), ECF No. 11. Plaintiffs' opposition to this motion puts forward arguments that, they claim, make their suit timely. They argue first that the applicable limitations period is not the general six-year limitations period in 28 U.S.C. § 2501 but rather the limitations period applicable to suits for refund specified by 26 U.S.C. ("I.R.C.") § 6532; next, that if the six-year limitations period applies, the relevant date on which it began to run was January 25, 2013, when the Internal Revenue Service ("IRS") "expressly approved all of the overassessments claimed by [p]laintiffs . . . in its report to the Joint Committee on Taxation" ("JCT"); and, finally, that if the six-year limitations period applies and plaintiffs' suit is held to be untimely, that the court transfer the case to the United States District Court for the Southern District of Florida, where plaintiffs can assert in that court arguments as to tolling the statute of limitations and as to the proper statute of limitations to apply. See Pls.' Opp'n to the Government's Mot. to Dismiss ("Pls' Opp'n") at 1-4, ECF No. 18; Pls.' Mem. of Law in Support of Pls.' Mot. to Transfer to Cure Want of Jurisdiction ("Pls.' Cross-Mot.") at 1, ECF No. 19; see also Hr'g Tr. 86:8 to 88:17, 98:13-15, 99:3-9 (June 20, 2018) (discussing potential transfer to the United States District Court for the Southern District of Florida).²

The parties' motions have been fully briefed, and a hearing was held on June 20, 2018. At the hearing, the court requested supplemental briefing from the parties regarding the application of I.R.C. § 6511 in the potential transferee court. That briefing having been completed on August 10, 2018, these motions are ready for decision.

BACKGROUND³

The chronology of the Pareskys' dispute with the IRS is complex, spanning the better part of a decade. The instant case stems from a net operating loss that the Pareskys, marriedtaxpayers living in Fisher Island, Florida, see Compl. ¶ 30, experienced in 2008 as a result of the Bernie Madoff Ponzi Scheme, Pls.' Opp'n at 1; see also Hr'g Tr. 87:15 to 88:17 (identifying the federal district court providing venue relative to plaintiffs' residence). The Pareskys sought to apply their substantial loss to reduce the fictitious amounts of income they reported receiving in tax years 2005 through 2007—via IRS Form 1040X—and to obtain refunds of the amount of tax paid in tax years 2003 through 2007 due to a carryback of Madoff losses from 2008 to those years—via IRS Form 1045. Pls.' Opp'n at 1, 5; Compl. ¶ 5.

Plaintiffs submitted their Forms 1045—relating to applications for tentative refund under I.R.C. § 6411—to the IRS seeking a carryback of their net operating loss on December 31, 2009. Compl. ¶ 9; see also Compl. Ex. A (plaintiffs' Forms 1045).⁴ The Pareskys allege that the IRS received the Forms 1045 on January 4, 2010, Compl. ¶ 10, but that the IRS records listed them as received on, alternatively, January 6, 2010 (in the initial denial letter it mailed on March 3, 2010), January 28, 2010 (in the IRS's transcripts of the Pareskys' 2006 and 2007 tax files), and, finally, as received but not dated (in the IRS's transcripts of the Pareskys' 2003, 2004, and 2005 tax files), Compl. ¶¶ 12-14; Compl. Exs. B-D. The IRS initially rejected the Pareskys' claims for a carryback because they "had not made their claims under the Safe Harbor of Revenue Procedure 2009-20." Compl. ¶ 15. The Pareskys' accountant informed the IRS that they did not intend to assert their carryback claims under that revenue procedure, see Hr'g Tr. 20:11 to 23:10 (discussing the purpose and effect of Revenue Procedure 2009-20), and the IRS accepted this assertion, eventually requesting additional documentation relating to the alternative minimum tax for tax years 2004 through 2006, which the Pareskys' accountant provided on April 2, 2010, Compl. ¶¶ 16-17.

The IRS subsequently issued refunds for each of the tax years for which a Form 1045 carryback was claimed. A refund of $552,202 was issued for 2003 on May 14, 2010. Compl. ¶ 20. A refund in the amount of $3,717,167 for 2004 was issued on April 23, 2010. Compl. ¶ 21. A refund for 2005 in the amount of $974,858 was issued on May 7, 2010. Compl. ¶ 22. The 2006 refund—for $2,899,253—and the 2007 refund—for $1,794,177—were both issued on the same day as the 2004 refund—April 23, 2010. Compl. ¶¶ 23-24. As the Pareskys note, see Compl. ¶¶ 20-24, each of these dates is more than 45 days after January 4, 2010.⁵

IRS records indicate that the refunds were "scheduled," a term that refers to an internal IRS process akin to authorizing the refund, see I.R.C. § 6407, shortly after the refunds were paid, see Def.'s Mot. at 9; Def.'s Reply in Support of Mot. to Dismiss for Lack of Subject Matter Jurisdiction and Resp. to Pls.' Cross-Mot. to Transfer Venue ("Def.'s Reply") Ex. 2 (Decl. of Benjamin Ray) (explaining and describing the IRS process by which refunds are scheduled), ECF No. 28-2. The government represents that the 2004 through 2007 refunds were scheduled on May 10, 2010, while the 2003 refund was scheduled on May 17, 2010. Def.'s Reply at 21. Usually, the scheduling date for a particular refund is determined by execution of Form 2188 "or its equivalent." Def.'s Reply at 20-21 (citing Coca-Cola, 87 Fed. Cl. at 256).⁶ Defendant submits, however, that the document retention period for these forms is 6 years and 3 months, and, as a result, the IRS has destroyed the Forms 2188 associated with the Pareskys' refunds. In support of their proffered scheduling date, then, the government submits the declaration of Benjamin Ray, a Program Manager in the IRS's Kansas City, Missouri processing center. Id. Ex. 2. Mr. Ray submits that IRS Form 23C is a form that is signed—and thus the associated refunds are scheduled—on the same day as the Forms 2188 with which the particular Form 23C is associated. See id. Ex. 2, ¶¶ 21-25. As such, it is the government's position that the Forms 23C—which have a document retention period of 15 years, see Hr'g Tr. 27:24-25—are equivalents of the Forms 2188 for purposes of ascertaining the scheduling date of a particular refund, see Def.'s Reply at 20-22; see also id. Ex. 2, ¶ 23. The government seeks to bolster Mr. Ray's declaration by attaching—and having Mr. Ray explain—the IRS's Individual Master File ("IMF") readout of the Pareskys' accounts. See id. ¶¶ 5-12; Def.'s Reply Ex. 3 (the Pareskys' IMF transcripts), and the Pareskys' tax transcripts, see Def.'s Reply Ex. 6 (the Pareskys' tax transcripts). The IMFreadont and tax transcripts record the relevant transactions occasioned by the Pareskys' carryback and result in their refunds being scheduled as occurring on the date on which the Forms 23C and, the government represents, the Forms 2188 were signed.

In the intervening years between the Pareskys' receipt of the refunds and their filing suit in this court, the IRS "initiated an examination of [the Pareskys'] tax liability for tax years 2003 through 2008, including the refunds sought in the . . . Form[s] 1045." Pls.' Opp'n at 6 (citing Pls.' Opp'n Ex. B, ¶ 14, ECF No. 18-2 (affidavit of Emily Paul, CPA)). The IRS's examination continued until October 2011, during which time the IRS sought—and plaintiffs agreed to—an extension of the limitations period via Form 872. Pls.' Opp'n at 7. In October 2011, the Pareskys' file was transferred to the IRS's Joint Committee Review Staff for preparation of a report to the JCT, as is required for refunds greater than certain dollar limits. See Pls.' Opp'n at 7; see also I.R.C. § 6405. The IRS's Joint Committee Review Staff submitted a letter to the JCT on January 25, 2013, stating that the refunds the Pareskys' sought on...