Triangle Corp. v. United States, Civ. No. H-83-1059 (PCD).

• Decision Date: 27 September 1984
• Docket Number: Civ. No. H-83-1059 (PCD).
• Citation: 592 F. Supp. 1316
• Parties: TRIANGLE CORPORATION v. UNITED STATES of America.
• Court: U.S. District Court — District of Connecticut

592 F. Supp. 1316

TRIANGLE CORPORATION v. UNITED STATES of America.

Civ. No. H-83-1059 (PCD).

United States District Court, D. Connecticut.

September 27, 1984.

J. Danford Anthony, Jr., Day, Berry & Howard, Hartford, Conn., for plaintiff.

Robert A. Brooks, Asst. U.S. Atty., Hartford, Conn., Marilla Lane Ross, Trial Atty., U.S. Dept. of Justice Tax Division, Washington, D.C., for defendant.

RULING ON MOTION TO DISMISS

DORSEY, District Judge.

Plaintiff, Triangle Corporation (Triangle), sued to recover interest alleged to be due on a tax refund, pursuant to Section 6611 of the Internal Revenue Code of 1954 (Title 26, United States Code). Defendant has moved to dismiss the case for lack of subject matter jurisdiction. For the reasons set forth below, defendant's motion is denied.

For the purposes of a motion to dismiss, the allegations of the complaint must be construed in the light most favorable to plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236-37, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). The following facts emerge from the complaint so construed. On March 31, 1983, plaintiff applied for tax refunds totaling $818,117.00 for the calendar years 1976, 1977, 1979 and 1980. These claims apparently were allowed and refunds have been paid. Plaintiff here claims that interest in the amount of $24,708.71 is due on these refunds. Plaintiff also claims that $2,301.75 in interest is due on an amount that the corporation was to have deposited on June 15, 1983, for income tax liability incurred during the calendar year 1982.¹ Thus, the total interest claimed for the five years in question is $27,010.46.

The sole issue presented by this motion is whether the district courts have subject matter jurisdiction over suits to recover interest on federal income tax refunds. Defendant properly contends that, under the principle of "sovereign immunity," the United States is immune from suit unless it has consented to be sued. See, e.g., United States v. Testan, 424 U.S. 392, 399, 96 S.Ct. 948, 953, 47 L.Ed.2d 114 (1975). Such consent is found when Congress confers jurisdiction over a particular matter upon the district courts. See, e.g., United States v. Sherwood, 312 U.S. 584, 61 S.Ct. 767, 85 L.Ed. 1058 (1940). As Congress is found to have clothed district courts with jurisdiction over actions to recover interest on tax refunds, sovereign immunity has been waived.

"The district courts shall have original jurisdiction of any civil action arising under any Act of Congress providing for internal revenue ...." 28 U.S.C. § 1340 (emphasis added). Interest on overpayments must be paid a taxpayer meriting a refund. See 26 U.S.C. § 6611 (1983). Thus, Section 6611 creates the substantive right to interest and § 1340 provides a forum for enforcement of that right.

Subject matter jurisdiction over this case is also found in 28 U.S.C. § 1346 (1983), which provides:

(a) The district courts shall have original jurisdiction, concurrent with the United States Claims Court, of:

(1) Any civil action against the United States for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal revenue laws ....

Thus, sovereign immunity is waived for suits for the refund of taxes "erroneously or illegally assessed or collected." Defendant contends, however, that interest on a refund does not constitute a sum "collected" within the purview of § 1346(a)(1) and that, therefore, district courts lack jurisdiction over suits to recover the interest on a tax refund.

In Draper v. United States, 62-2 U.S. T.C. ¶ 9697 (E.D.Wash.1962), taxpayers sued to recover interest on a deficiency which they had paid and which was later determined to have been excessive. As in the case at bar, the claim sought only interest on the refund. Jurisdiction was found based on 28 U.S.C. § 1346(a)(1).

Although § 1346(a)(1) does not expressly state that district courts shall have jurisdiction over actions to recover only interest on a refund, it must be so interpreted in order to provide a forum in which to enforce the right provided by Section 6611. Otherwise, the IRS could deny taxpayers interest to which they are entitled by simply refunding the overpayment without interest, and thwart any court action to collect the interest on the jurisdictional challenge made here. The government does not contest the right to interest created by Section 6611, but it offers no suggestion as to the forum in which such right can be enforced. The government cites no authority for its position, nor did the court's independent research uncover any such authority. If neither the district courts nor the United States Claims Court (which has concurrent jurisdiction in tax matters, § 1346(a)(1)) could entertain a suit for interest, then the taxpayer would appear, as plaintiff alleges, effectively to...