Walby v. United States
| Decision Date | 29 April 2020 |
| Docket Number | 2019-2406 |
| Parties | Sharon M. WALBY, Plaintiff-Appellant v. UNITED STATES, Defendant-Appellee |
| Court | U.S. Court of Appeals — Federal Circuit |
Sharon M. Walby, Palms, MI, pro se.
Nathaniel Pollock, Tax Division, United States Department of Justice, Washington, DC, for defendant-appellee. Also represented by Arthur Thomas Catterall, Richard E. Zuckerman.
Before Newman, O’Malley, and Taranto, Circuit Judges.
Sharon M. Walby ("Walby") filed this action in the Court of Federal Claims ("Claims Court") on June 13, 2019, seeking a refund of federal income taxes withheld from her wages for the years 2014, 2016, 2017, and 2018. The Claims Court dismissed Walby’s complaint sua sponte for failure to state a claim upon which relief can be granted, and, additionally, with respect to the 2014 taxes, for lack of subject matter jurisdiction. Walby v. United States , 144 Fed. Cl. 1, 11 (2019). Walby appeals and the government moves for sanctions. For the reasons explained below, we affirm the Claims Court’s decision and deny the government’s motion for sanctions.
Walby was born in Michigan, and, for the relevant time period, lived and worked in Michigan. Walby , 144 Fed. Cl. at 4. For the 2014 taxable year, Walby’s employer, Baker College, withheld $9,751.60 in federal income taxes from her wages. Id. In 2015, Walby claimed exemption from all withholdings and her employer did not withhold any federal income taxes from her paychecks for that year. Id. That same year, in January, Walby executed an "Affidavit of Citizenship" before a notary public and submitted it to the United States Department of State ("State Department"). Id. In this affidavit, Walby declared that she was a sovereign citizen of the state of Michigan and, "because she was not restricted by the 14th Amendment to the United States Constitution, she was not a United States citizen thereunder but rather a nonresident alien not subject to income taxes." Id. (internal quotation marks omitted). According to Walby, the act of submitting the affidavit made her a nonresident alien. Id.
In November 2016, at the direction of the Internal Revenue Service ("IRS"), Baker College again began to withhold federal income taxes from Walby’s paychecks. It withheld income taxes in the amount of $1,882.36 for the year 2016, $13,032.52 for the year 2017, and $10,924.43 for the year 2018.
Based on her assertion that she was exempt from federal income taxes, Walby did not file federal income tax returns for the 2014–2018 tax years. Instead, she filed two separate Forms 843, Claim for Refund and Request for Abatement. She filed the first of these forms with the IRS on December 22, 2017, claiming a refund of the federal income taxes withheld from her 2014 paychecks. Walby filed the second of these forms with the IRS on December 8, 2018, claiming a refund of federal income taxes withheld from her 2016–2018 paychecks.
Walby alleges that, despite her request for a hearing, the IRS did not respond to these refund claims. Walby therefore filed this tax refund lawsuit against the government on June 13, 2019.
On July 19, 2019, the Claims Court dismissed Walby’s complaint sua sponte . Walby , 144 Fed. Cl. at 1. Citing Internal Revenue Code ("I.R.C.") § 7422(a), the trial court explained that filing a timely refund claim with the IRS is a jurisdictional prerequisite to filing a refund suit. The court further explained that: (1) a timely administrative refund claim must be filed within two years of the taxes being paid; and (2) withheld federal income taxes for each calendar year are deemed paid on April 15 of the following year. Walby , 144 Fed. Cl. at 7 (citing I.R.C. §§ 6511, 6513 ). Based on the foregoing, the court found that Walby’s 2014 administrative tax refund claim was untimely because it was filed in December 2017, more than two years after April 15, 2015—the date those taxes were deemed paid. Id. Accordingly, the court held that it lacked jurisdiction over Walby’s 2014 refund claim. Id. at 8.
By contrast, the court found that Walby’s refund claims for the years 2016–2018 were timely because they were filed on December 8, 2018, within two years of when those taxes were deemed paid. The court therefore found that it had jurisdiction over those refund claims. Id. The court nevertheless dismissed these claims as meritless for two separate reasons: (1) Walby was a Unites States born individual who could not meet "the burden of proof to establish ‘a loss of United States nationality,’ " and (2) even if she were a nonresident alien, Walby qualified as a United States resident for tax purposes pursuant to I.R.C. § 7701 by virtue of her substantial presence in the United States during the relevant time period. Id. at 8–9. Accordingly, the Claims Court dismissed Walby’s complaint. Walby timely appeals. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).
Whether the Claims Court properly dismissed a complaint for lack of subject matter jurisdiction, or for failure to state a claim upon which relief can be granted, are both questions of law that we review de novo . Anaheim Gardens v. United States , 444 F.3d 1309, 1314 (Fed. Cir. 2006) ; Folden v. United States , 379 F.3d 1344, 1354 (Fed. Cir. 2004). We reverse the Claims Court’s legal conclusion only if it is incorrect as a matter of law. See Placeway Constr. Corp. v. United States , 920 F.2d 903, 906 (Fed. Cir. 1990). We address in turn the Claims Court’s determinations regarding the timeliness of Walby’s 2014 administrative refund claim and her failure to state a claim upon which relief can be granted.
Congress has waived sovereign immunity over tax refund suits pursuant to 28 U.S.C. § 1346(a)(1), which provides the Claims Court (and district courts) with the authority to hear "[a]ny civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected." 28 U.S.C. § 1346(a). That waiver is limited, however, and certain preconditions must be met before a taxpayer is permitted to bring a tax refund suit. Specifically, the taxpayer must make full payment of the tax liability, bring a timely claim for refund with the IRS, and file a timely complaint after the refund claim is denied or deemed denied. I.R.C. §§ 7422(a), 6532(a) ; Shore v. United States , 9 F.3d 1524, 1526 (Fed. Cir. 1993).
On appeal, Walby does not challenge the Claims Court’s determination that her IRS refund claim for the 2014 tax year was untimely. "Our law is well established that arguments not raised in the opening brief are waived." SmithKline Beecham Corp. v. Apotex Corp. , 439 F.3d 1312, 1319 (Fed. Cir. 2006). Accordingly, we treat any argument regarding the Claims Court’s dismissal of Walby’s 2014 refund claim as waived.
Even if these arguments were not waived, however, we see no error in the trial court’s determination that Walby’s 2014 administrative refund claim was untimely. I.R.C. § 7422(a) provides, "[n]o suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected ... until a claim for refund or credit has been duly filed with the Secretary, according to the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof." And I.R.C. § 6511(a) provides that, for cases where no return was filed by the taxpayer, an administrative refund claim must be filed with the IRS within 2 years from the time the tax was paid. "[T]he plain language of 26 U.S.C. §§ 7422(a) and 6511 requires a taxpayer seeking a refund for ... unlawfully assessed tax[es], to file a timely administrative refund claim before bringing suit against the Government." United States v. Clintwood Elkhorn Mining Co. , 553 U.S. 1, 14, 128 S.Ct. 1511, 170 L.Ed.2d 392 (2008).
In Walby’s case, her 2014 claims were deemed paid on April 15, 2015 because withheld income taxes are deemed to have been paid on April 15th of the following year. I.R.C. § 6513(b). To be timely, her administrative refund claim should have been filed with the IRS by April 15, 2017. But Walby did not file her refund claim until December 22, 2017. Walby’s 2014 refund claim was, therefore, untimely and the Claims Court properly dismissed that claim.
There is one aspect of the court’s conclusion regarding this claim, however, that warrants additional examination. The Claims Court concluded that, because Walby’s 2014 administrative refund claim was untimely, pursuant to 26 U.S.C. § 7422(a), it lacked subject matter jurisdiction over that claim. Although this conclusion is correct under our existing case law, see, e.g. , Stephens v. United States , 884 F.3d 1151, 1156 (Fed. Cir. 2018), it may be time to reexamine that case law in light of the Supreme Court’s clarification that so-called "statutory standing" defects—i.e., whether a party can sue under a given statute—do not implicate a court’s subject matter jurisdiction. Lexmark Int’l, Inc. v. Static Control Components, Inc. , 572 U.S. 118, 128 n.4, 134 S.Ct. 1377, 188 L.Ed.2d 392 (2014) ; see also Lone Star Silicon Innovations LLC v. Nanya Tech. Corp. , 925 F.3d 1225, 1235 (Fed. Cir. 2019) ().
The Tucker Act grants the Claims Court jurisdiction to render judgment "upon any claim against the United States founded either upon the Constitution, or any Act of Congress ... in cases not sounding in tort." 28 U.S.C. § 1491(a)(1). Additionally, 28 U.S.C. § 1346(a) provides that the Claims Court shall have original jurisdiction (concurrent with the district courts) of "[a]ny civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected." As such, Walby’s failure to meet...
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