Wachovia Bank, N.A. v. U.S.

• Decision Date: 13 July 2006
• Docket Number: No. 05-12814.,05-12814.
• Citation: 455 F.3d 1261
• Parties: WACHOVIA BANK, N.A., as Trustee of the George C. Nunamann Trust, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

455 F.3d 1261

WACHOVIA BANK, N.A., as Trustee of the George C. Nunamann Trust, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.

No. 05-12814.

United States Court of Appeals, Eleventh Circuit.

July 13, 2006.

Teresa E. McLaughlin, Michael J. Haungs, Steven W. Parks, U.S. Dept. of Justice, Tax Div., Washington, DC, for U.S.

John Richard Hamilton, Foley & Lardner, LLP, Orlando, FL, for Plaintiff-Appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before CARNES, WILSON and PRYOR, Circuit Judges.

CARNES, Circuit Judge:

The Beatles' taxman told us what we'd see:

"There's one for you, nineteen for me."¹ But if we really want some funds to free, how soon does asking have to be?

Doggerel aside, the issue presented in this case is whether the statute of limitations period set forth in 26 U.S.C. § 6511(a) applies to claims for refunds made by those who have mistakenly filed a return and paid tax when they were not actually required to file a tax return. And as the Beatles probably would have guessed, the lamentable answer is yes.

I.

Wachovia Bank is the trustee for the George C. Nunamann Trust, which was created in 1984. Since 1991, when it was reformed in order to meet the requirements of 26 U.S.C. § 664(c), the trust has qualified as a charitable remainder trust that is exempt from federal income tax. Having qualified for that status, the trust has not been obligated since 1991 to file a fiduciary income tax return or to pay income tax, but only to file an information return. Unfortunately, Wachovia failed to recognize the trust's tax exempt status after its reformation, and filed income tax returns for and continued to pay taxes out of the trust for the 1991 through 2001 tax years.

Having belatedly realized its mistake, on May 7, 2003 Wachovia filed with the IRS amended Forms 1041 requesting a refund of the taxes inadvertently paid on behalf of the trust for the 1997 and 1998 tax years. In a letter dated August 12, 2003, the IRS denied those refund claims, which totaled $111,823. The denial letter explained that the claims for a refund as to those tax years were barred by the three-year statute of limitations set forth in 26 U.S.C. § 6511(a). Soon after, Wachovia filed this lawsuit in the district court seeking the amount it had paid by mistake for the 1997 and 1998 tax years.

The parties filed cross-motions for summary judgment. The government contended that Wachovia's suit was time-barred because it had not filed an administrative claim for a refund within the time limits established by § 6511(a). Wachovia did not dispute that it had filed its claims for refunds after the § 6511 time limit had expired. Instead, Wachovia contended that § 6511 did not apply to its refund claims because it was never required to file a tax return for the trust to begin with. Wachovia's position was that only the general six-year statute of limitations, outside the Tax Code, the one set forth in 28 U.S.C. § 2401(a), applied to its refund claim. The district court found merit in Wachovia's position, and concluded that the three-year limitations period in § 6511 applies only to taxpayers who are required to file tax returns. Based on that reasoning, it granted Wachovia's motion for summary judgment. The government appeals.

II.

Section 6511(a), titled "Limitations on credit or refund," sets forth the limitations period for tax refund claims:

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 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. Claim for the 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 3 years from the time the tax was paid.

26 U.S.C. § 6511(a).

A tax payment may constitute an "overpayment" even when no tax liability exists. The Tax Code provides:

Rule where no tax liability.—An amount paid as tax shall not be considered not to constitute an overpayment solely by reason of the fact that there was no tax liability in respect of which such amount was paid.

26 U.S.C. § 6401(c) (emphasis added). The double negative in that provision means that even if one never owed tax in the first place but paid tax anyway, the mistaken payment constitutes an overpayment. See id. The sensible idea, somewhat obscured in the Tax Code speak of that provision, is that because anything is more than nothing, any payment is an overpayment when no payment was due.

A district court has jurisdiction to entertain civil actions against the government "for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected." 28 U.S.C. § 1346(a)(1). The section of the Tax Code which governs civil actions for a refund, 26 U.S.C. § 7422(a), states that before a taxpayer can file suit against the government to recover tax that he alleges the IRS has "in any manner wrongfully collected," he must "duly" file an administrative claim for refund "according to the provisions of law in that regard" and in accordance with the relevant regulations. 26 U.S.C. § 7422(a). If the requirements of § 7422(a) are not met, a court has no subject matter jurisdiction to hear the claim for refund. See id.

A general statute of limitations (outside of the Tax Code), titled "Time for commencing action against United States," applies to suits against the federal government and provides that "every civil action commenced against the United States shall be barred unless the complaint is filed within six years after the right of action first accrues." 28 U.S.C. § 2401. This case requires us to interpret those statutes.

Wachovia's position here, as in the district court, is that the six-year general § 2401 limitations period applies but the tax-specific § 6511(a) three-year limitations period does not. That has to be its position, because Wachovia concedes that the claims for refund it filed with the IRS for the 1997 and 1998 tax years came more than three years after it had filed the returns for those years (and also more than two years after it had paid taxes for them). If § 6511(a) applies, Wachovia loses.

Wachovia's argument against the application of § 6511(a) is simple. It focuses on these thirteen words of the statutory language: "in respect of which tax the taxpayer is required to file a return." 26 U.S.C. § 6511(a). Wachovia contends that the plain meaning of that language is that § 6511(a) applies only to taxpayers who are required to file a return, and that the reference in that language to "the taxpayer" means to the specific refund claimant only, not taxpayers generically. If that argument is correct, Wachovia wins because everyone agrees the trust was not required to file a tax return.

The government's position is that § 6511(a) should not be read in isolation but instead in conjunction with § 7422 and also with a Treasury Regulation, 26 C.F.R. § 301.6511(a)-1, which relates to § 6511(a). That regulation provides:

(a) In the case of any tax (other than a tax payable by stamp):

(1) If a return is filed, a claim for credit or refund of an overpayment must be filed by the taxpayer within 3 years from the time the return was filed or within 2 years from the time the tax was paid, whichever of such periods expires the later.

(2) If no return is filed, the claim for credit or refund of an overpayment must be filed by the taxpayer within 2 years from the time the tax was paid.

(b) In the case of any tax payable by means of a stamp, a claim for credit or refund of an overpayment of such tax must be filed by the taxpayer within 3 years from the time the tax was paid.

26 C.F.R. § 301.6511(a)-1(a)-(b) (emphasis added).

The government contends that 26 U.S.C. § 6511(a) and 26 C.F.R. § 301.6511(a)-1 cover the universe of claims for refunds and divide that universe into two categories. The first category of refund claims is defined in the opening sentence of § 6511(a), as well as by subsection (a) of the regulation, and it includes any tax that is payable by return instead of stamp. The second category is defined by the second sentence of § 6511(a), as well as by subsection (b) of the regulation, and it includes any tax that is payable by stamp instead of return. No taxes fall through the cracks of § 6511(a) and the regulation, because every tax is payable either by return or stamp. Under this reading no tax refunds are governed by the non-Tax Code general statute of limitations contained in 28 U.S.C. § 2401. In other words, either a tax is payable by stamp or it is not, and if it is not, a claim for refund of an overpayment must be made within three years from the time the return was filed. See 26 U.S.C. § 6511(a).

If the government's reading of § 6511(a) and the regulation is correct, then Wachovia loses. It loses because the three-year statute of limitations contained in § 6511(a) applies to its effort to secure an income tax refund, and Wachovia waited more than three years to begin that effort.

The government attacks Wachovia's reliance on "the taxpayer" language in § 6511(a) by asserting that the phrase refers to the taxpayer generally, generically, and non-case specifically. Although the government does not put it this way, its argument is that "the taxpayer" is to "taxpayer" as "the citizen" is to "citizen." When we say that "the citizen" has certain rights and responsibilities, we are not necessarily talking about the one, single citizen who happens to be before the court, but we could—depending on context—be talking about citizens in general, generically, and non-case specifically. The context here, the...