In 1975, respondent Dalm was appointed administratrix of her
deceased former employer's estate. In 1976 and 1977, she received
payments from the decedent's brother, who wanted her to share in
the estate because of her years of service to the decedent. In
December, 1976, a federal gift tax return was filed, and the gift
tax was paid, for that year's payment to Dalm. The Internal Revenue
Service (IRS) then assessed penalties and interest with respect to
the 1976 transfer, which were paid in March, 1977. No gift tax
return was filed for the 1977 payment. After auditing Dalm's 1976
and 1977 income tax returns, the IRS asserted deficiencies upon
determining that she should have reported the payments from the
brother as income to her as administratrix. Arguing that the
payments were gifts, she petitioned the Tax Court for a
redetermination of the deficiencies, but made no claim for a credit
or recoupment of the gift tax paid. The parties settled the case,
agreeing to a stipulated decision that Dalm owed lesser income tax
deficiencies than those asserted for both tax years. In November,
1984, she filed an administrative claim for refund of the gift tax,
interest, and penalties paid with respect to the 1976 transfer,
even though 26 U.S.C. § 6511(a) required that any refund claim be
filed within three years of when the return was filed. When the IRS
failed to act on the claim, she filed a District Court action for a
refund of "overpaid gift tax," alleging that the court had
jurisdiction under 28 U.S.C. § 1346(a)(1). The court dismissed the
suit for lack of jurisdiction in light of § 6511(a), rejecting her
contention that the suit was timely under the doctrine of equitable
recoupment set forth in
Bull v. United States,
295 U. S. 247. The
Court of Appeals reversed, finding that her claim satisfied all of
the doctrine's requirements.
Held: The District Court lacked jurisdiction over
Dalm's refund suit. Pp.
494 U. S.
601-611.
(a) Title 28 U.S.C. § 1346(a)(1)'s provision of broad district
court jurisdiction over civil tax refund suits must be read in
conformity with other statutory provisions conditioning the right
to bring such a suit, including 26 U.S.C. § 7422(a), which requires
the prior filing of an administrative refund claim, and § 6511(a),
which provides the applicable statute of limitations for filing
such a claim. Since Dalm failed to file her
Page 494 U. S. 597
claim within the specified time limits, the District Court was
barred from entertaining her suit. Pp.
494 U. S.
601-602.
(b) The statute of limitations long since having run, the
doctrine of equitable recoupment does not support Dalm's suit.
Bull must be distinguished on the ground that, there,
equitable recoupment of estate tax was sought in an action for
refund of income tax, over which the court had undisputed
jurisdiction, and the only issue was whether the court, in the
interests of equity, could adjust the income tax owed to take
account of an estate tax paid in error but which the petitioner
could not recover in a separate, time-barred refund action. Here,
Dalm does not seek to invoke equitable recoupment in determining
her income tax liability; she has already litigated that liability
in the Tax Court without raising an equitable recoupment claim, and
is foreclosed from litigating it now. She seeks to invoke equitable
recoupment only in a separate action for refund of gift tax, an
action for which there is no statutory authorization by reason of
the statute of limitations bar.
Bull and
Stone v.
White, 301 U. S. 532,
stand only for the proposition that a party litigating a tax claim
in a timely proceeding may, in that proceeding, seek recoupment of
a related, and inconsistent, but now time-barred tax claim relating
to the same transaction. They do not allow equitable recoupment to
be the sole basis for jurisdiction. Pp.
494 U. S.
602-608.
(c) Since Dalm failed to comply with the applicable statute of
limitations, the Government is immune from suit under settled
principles of sovereign immunity.
See, e.g., United States v.
Mottaz, 476 U. S. 834,
476 U. S. 841.
Because Dalm's action does not come within any of the statutory
exceptions to the limitations period prescribed by §§ 7422 and
6511(a), allowing her to maintain this suit would effectively
override Congress' judgment as to when equity requires an
exception. Both the IRS and a court which has jurisdiction over a
timely suit for refund may still consider an equitable recoupment
claim for an earlier tax paid under an inconsistent theory on the
same transaction. Pp.
494 U. S.
608-610.
(d) The Court of Appeals' reasoning that recoupment should be
permitted in this case because it effected, with respect to a
single transaction, the recovery of a tax based upon a theory
inconsistent with the theory upon which a later tax was paid
mistakes the threshold requirement for such a suit. Although this
Court's precedents allowing recoupment pertain to cases where a
single transaction is subject to inconsistent taxation, the reason
the statute of limitations is not a bar in those cases is that,
unlike here, the court has uncontested jurisdiction to adjudicate
one of the taxes in question and, therefore, the equitable power to
examine and consider the entire transaction.
See Rothensies v.
Electric Storage Battery Co., 329 U.
S. 296,
329 U. S. 299.
Pp.
329 U. S.
610-611.
867 F.2d 305, reversed.
Page 494 U. S. 598
KENNEDY, J., delivered the opinion of the Court, in which
REHNQUIST, C.J., and WHITE, BLACKMUN, O'CONNOR, and SCALIA, JJ.,
joined. STEVENS, J., filed a dissenting opinion, in which BRENNAN
and MARSHALL, JJ., joined,
post, p.
494 U. S.
612.
JUSTICE KENNEDY delivered the opinion of the Court.
Single transactions, it is well known, may be susceptible to
different, and inconsistent, theories of taxation. In the case
before us, the taxpayer treated moneys derived from her deceased
employer's estate as a gift and paid gift tax on the transfer. Some
years later, the Government contended that the money the taxpayer
had received from the transaction was income. The taxpayer
disagreed, and the Government's assertion of an income tax
deficiency was the subject of proceedings in the United States Tax
Court. The question presented is whether, the statute of
limitations long since having run, the doctrine of equitable
recoupment supports a separate suit for refund of the earlier paid
gift tax after the taxpayer settled the Tax Court deficiency
proceeding and agreed to pay income tax on the transaction. We hold
that it does not.
I
The taxpayer, Frances Dalm, is the respondent here. Dalm was
appointed administratrix of the estate of Harold Schrier in May,
1975, at the request of Schrier's surviving brother, Clarence. It
appears Dalm had been the decedent's loyal secretary for many
years, and that Clarence wanted her to take charge of the affairs
of the estate and receive some of the moneys that otherwise would
belong to him.
Page 494 U. S. 599
Dalm received fees from the estate, approved by the probate
court, of $30,000 in 1976 and $7,000 in 1977. She also received
from Clarence two payments, $180,000 in 1976 and $133,813 in 1977.
Clarence,and his wife filed a gift tax return in December, 1976,
reporting the $180,000 payment as a gift to Dalm, and in that same
month Dalm paid the gift tax of $18,675. The Internal Revenue
Service (IRS) later assessed an additional $1,587 in penalties and
interest with respect to the transfer. The Schriers paid the
penalties and interest in 1977, and were reimbursed by Dalm. But no
gift tax return was filed with respect to the 1977 payment of
$133,813.
After auditing Dalm's 1976 and 1977 income tax returns, the IRS
determined that the payments from Clarence represented additional
fees for Dalm's services as administratrix of the estate, and
should have been reported as income. The IRS asserted deficiencies
in her income tax of $91,471 in 1976, and $70,639 in 1977, along
with additions to the taxes under § 6653(a) of the Internal Revenue
Code of 1954 (IRC), 26 U.S.C. § 6653(a) (1982 ed.). [
Footnote 1]
Dalm petitioned the Tax Court for a redetermination of the
asserted deficiencies, as was her right under § 6213(a). In her
petition, she argued that the 1976 and 1977 payments from Clarence
were gifts to carry out the wish of the decedent that she share in
the estate. After two days of trial, Dalm and the IRS settled the
case, with the parties agreeing to a stipulated decision that
respondent owed income tax deficiencies of $10,416 for 1976 and
$70,639 for 1977. No claim for a credit or recoupment of the gift
tax paid by Dalm was raised in the Tax Court proceedings, although
there is some dispute whether the gift tax was one of the factors
considered in arriving at the terms of the settlement.
See
n 2,
infra.
Immediately after agreeing to the settlement, Dalm filed an
administrative claim for refund of the $20,262 in gift tax,
interest, and penalties paid with respect to the $180,000
Page 494 U. S. 600
transfer in 1976. The claim was filed in November, 1984, even
though the IRC required Dalm to file any claim for a refund of the
gift tax by December, 1979.
See § 6511(a). When the IRS
failed to act upon her claim within six months, Dalm filed suit in
the United States District Court for the Western District of
Michigan, seeking what in her complaint she denominated a refund of
"overpaid gift tax." Her complaint alleged that the District Court
had jurisdiction under 28 U.S.C. § 1346(a)(1) (1982 ed.).
The Government moved to dismiss the suit for lack of
jurisdiction and for summary judgment, arguing that the suit was
untimely under the applicable statute of limitations. The District
Court granted the Government's motions, rejecting Dalm's contention
that her suit was timely under the doctrine of equitable recoupment
as set forth in our opinion in
Bull v. United States,
295 U. S. 247
(1935), a case we shall discuss. The court held that equitable
recoupment did not authorize it to exercise jurisdiction over "an
independent lawsuit, such as this suit, . . . maintained for a
refund for a year in which the statute of limitations has expired."
App. to Pet. for Cert.19a.
On appeal, the Court of Appeals for the Sixth Circuit reversed.
867 F.2d 305 (1989). The court found Dalm's claim satisfied all of
the requirements for equitable recoupment expressed in our cases.
It rejected the District Court's characterization of Dalm's action
as an independent lawsuit barred by the statute of limitations,
reasoning that she could maintain an otherwise barred action for
refund of gift tax because the Government had made a timely claim
of a deficiency in her income tax based upon an inconsistent legal
theory.
Id. at 311-312 (citing
Kolom v. United
States, 791 F.2d 762 (CA9 1986)). [
Footnote 2]
Page 494 U. S. 601
Because the approach taken by the Sixth and Ninth Circuits is in
conflict with that adopted by Seventh Circuit,
see O'Brien v.
United States, 766 F.2d 1038 (1985), we granted certiorari,
493 U.S. 807 (1989), and now reverse.
II
The ultimate question in the case is whether the District Court
had jurisdiction over Dalm's suit seeking a refund of the gift tax,
interest, and penalties paid on the 1976 transfer. We hold that it
did not.
In her complaint, Dalm invoked 28 U.S.C. § 1346(a)(1) (1982
ed.), under which a district court has jurisdiction over a
"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."
Despite its spacious terms, § 1346(a)(1) must be read in
conformity with other statutory provisions which qualify a
taxpayer's right to bring a refund suit upon compliance with
certain conditions. The first is § 7422(a), which, tracking the
language of § 1346(a)(1), limits a taxpayer's right to bring a
refund suit by providing that
"[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, or of any penalty
claimed to have been collected without authority, or of any sum
alleged to have been excessive or in any manner wrongfully
collected, until a claim for refund or credit has been duly filed
with the Secretary
Page 494 U. S. 602
according to the provisions of law in that regard, and the
regulations of the Secretary established in pursuance thereof."
Second, § 6511(a) provides that, if a taxpayer is required to
file a return with respect to a tax, such as the gift tax, the
taxpayer must file any claim for refund within three years from the
time the return was filed or two years from the time the tax was
paid, whichever period expires later. Read together, the import of
these sections is clear: unless a claim for refund of a tax has
been filed within the time limits imposed by § 6511(a), a suit for
refund, regardless of whether the tax is alleged to have been
"erroneously," "illegally," or "wrongfully collected," §§
1346(a)(1), 7422(a), may not be maintained in any court.
See
United States v. Kales, 314 U. S. 186,
314 U. S. 193
(1941).
There is no doubt that Dalm failed to comply with these
statutory requirements. The Schriers filed their gift tax return
and Dalm paid the gift tax on the 1976 transfer in December, 1976.
She paid the penalties and interest on that tax in March, 1977.
Dalm did not file her claim for refund of the gift tax until
November, 1984, long after the limitations period expired. Under
the plain language of §§ 6511(a) and 7422(a), the District Court
was barred from entertaining her suit for a refund of the tax.
B
The Court of Appeals did not contest this analysis; indeed, it
recognized that "[t]here is no statutory basis for permitting the
recovery of a tax overpayment after the statute of limitations has
expired." 867 F.2d at 308. Despite the lack of a statutory basis
for recovery, the court concluded that the doctrine of equitable
recoupment permits Dalm to maintain an action to recover the
overpaid gift tax. We disagree.
The doctrine of equitable recoupment was first addressed by us
in our opinion in
Bull v. United States, supra. There, the
dispute centered on whether partnership distributions received
Page 494 U. S. 603
by a decedent's estate after his death were subject to estate
tax or income tax. After an audit, the executor of the estate
included the sums in the estate tax return and paid the estate tax
in 1920 and 1921. In 1925, the Commissioner of Internal Revenue
notified the estate of a deficiency in the estate's income tax for
the 1920 tax year, contending that the same distributions upon
which estate tax had been paid should have been treated as income.
The Commissioner, however, did not give credit for the estate tax
earlier paid on the value of the distributions.
That same year, the estate petitioned to the Board of Tax
Appeals for a redetermination of the deficiency. [
Footnote 3] After the Board sustained the
Commissioner's deficiency determination, the estate paid the
additional income tax and filed a claim for refund of the income
tax paid. The Commissioner rejected the claim, and, in September,
1930, the executor sued in the Court of Claims for a refund of the
income tax. [
Footnote 4]
Page 494 U. S. 604
In his petition to the Court of Claims, the executor argued (1)
that the amount taxed was not income, so that the estate was
entitled to a refund of the entire amount of income tax paid; and
(2) alternatively, if the amount taxed was income, the Government
should credit against the income tax due the overpayment of estate
tax, plus interest, attributable to the inclusion of the amount in
the taxable estate. The Court of Claims rejected both
arguments.
We reversed, holding that the executor was entitled to a credit
against the income tax deficiency in the amount of the overpayment
of estate tax, with interest. 295 U.S. at
295 U. S. 263.
We began by acknowledging that the executor had not filed a claim
for refund of the estate tax within the limitations period, and
that any action for refund of the tax was now barred.
Id.
at
295 U. S. 259,
295 U. S.
260-261. "If nothing further had occurred Congressional
action would have been the sole avenue of redress. "
Id.
at
295 U. S.
261.
What did occur, however, was that, after the limitations period
on the estate tax had run, the Government assessed a deficiency in
the estate's income tax based upon the same taxable event, and the
deficiency became the subject of litigation between the estate and
the Government. We reasoned that a tax assessment is in essence an
assertion by the sovereign that the taxpayer owes a debt to it; but
that, because "taxes are the life-blood of government," it was
necessary for the tax assessed to be collected prior to
adjudication of whether the assessment was erroneous or unlawful.
As a result,
"the usual procedure for the recovery of debts is reversed in
the field of taxation. Payment precedes defense, and the burden of
proof, normally on the claimant,
Page 494 U. S. 605
is shifted to the taxpayer. . . . But these reversals of the
normal process of collecting a claim cannot obscure the fact that,
after all, what is being accomplished is the recovery of a just
debt owed the sovereign."
Id. at
295 U. S. 260.
Under our reasoning, the proceeding between the executor and the
Government was, in substance, an attempt by the Government to
recover a debt from the estate. The debt was the income tax that
was owed, even though, in fact, it already had been paid. Had the
Government followed the "usual procedure" of recovering debts by
instituting an action at law for the income tax owed, the executor
would have been able to defend against the suit by "demanding
recoupment of the amount mistakenly collected as estate tax and
wrongfully retained."
Id. at
259 U. S. 261
(citing
United States v. State Bank, 96 U. S.
30 (1878)).
"If the claim for income tax deficiency had been the subject of
a suit, any counterdemand for recoupment of the overpayment of
estate tax could have been asserted by way of defense, and credit
obtained notwithstanding the statute of limitations had barred an
independent suit against the Government therefor. This is because
recoupment is in the nature of a defense arising out of some
feature of the transaction upon which the plaintiff's action is
grounded. Such a defense is never barred by the statute of
limitations so long as the main action itself is timely."
295 U.S. at
295 U. S. 262.
We found it immaterial that, rather than the Government having to
sue to collect the income tax, the executor was required first to
pay it and then seek a refund.
"This procedural requirement does not obliterate his substantial
right to rely on his cross-demand for credit of the amount which,
if the United States had sued him for income tax, he could have
recouped against his liability on that score."
Id. at
295 U. S. 263.
[
Footnote 5]
Page 494 U. S. 606
Dalm contends that the only distinction between her case and
Bull is the "meaningless procedural distinction" that her
claim of equitable recoupment is raised in a separate suit for
refund of gift tax, after she had litigated the income tax
deficiency, while in
Bull the claim of equitable
recoupment of the estate tax was litigated as part of a suit for
refund of that tax alleged to be inconsistent with the estate tax.
A distinction that has jurisdiction as its central concept is not
meaningless. In
Bull, the executor sought equitable
recoupment of the estate tax in an action for refund of income tax,
over which it was undisputed that the Court of Claims had
jurisdiction.
See n 4,
supra. All that was at issue was whether the Court of
Claims, in the interests of equity, could adjust the income tax
owed to the Government to take account of an estate tax paid in
error but which the executor could not recover in a separate refund
action. Here, Dalm does not seek to invoke equitable recoupment in
determining her income tax liability; she has already litigated
that liability without raising a claim of equitable recoupment and
is foreclosed from relitigating it now.
See § 6512(a). She
seeks to invoke equitable recoupment only in a separate action for
refund of gift tax, an action for which there is no statutory
authorization by reason of the bar of the limitations statute.
It is instructive to consider what the facts in
Bull
would have to be if Dalm's contention is correct that her case is
identical to
Bull in all material respects. The executor
in
Bull would have litigated the income tax liability,
without raising a claim of equitable recoupment, in the Board of
Tax Appeals and/or in the Court of Claims, with the Government
winning in each forum. Then, having exhausted his avenues
Page 494 U. S. 607
of litigating the income tax liability and paid the tax, the
executor would have filed a claim for refund of the estate tax with
the Commissioner, asserting equitable recoupment as the basis for
the refund, with the Commissioner rejecting it as untimely. At that
point, the executor would have brought suit for refund of the
estate tax in the Court of Claims after the statute of limitations
had run. Had the case come to us with those facts, we would have
faced the issue presented here: whether the court in which the
taxpayer was seeking a refund was barred from entertaining the
suit. We can say with assurance that we were not presented with
this issue in
Bull, and did not consider it. Even had the
issue been raised,
Bull itself suggests that we would have
rejected Dalm's argument out of hand.
See Bull, 295 U.S.
at
295 U. S. 259
("The fact that the petitioner relied on the Commissioner's
assessment for estate tax, and believed the inconsistent claim of
deficiency of income tax was of no force cannot avail to toll the
statute of limitations, which forbade the bringing of any action in
1930 for refund of estate tax payments made in 1921").
The only other decision in which we have upheld a claim or
defense premised upon the doctrine of equitable recoupment is
consistent with our analysis today. In
Stone v. White,
301 U. S. 532
(1937), a trust had paid the income it received from the corpus to
its sole beneficiary and also paid the tax due on the income. After
the statute of limitations governing the Government's right to
collect the income tax from the beneficiary had run, the trust
filed a timely suit seeking a refund of the income tax paid on the
theory that the beneficiary, not the trust, was liable for the tax.
We held that, given the identity of interest between the
beneficiary and the trust, the Government could invoke equitable
recoupment to assert its now-barred claim against the beneficiary
as a defense to the trust's timely claim for a refund.
Id.
at
301 U. S.
537-539. As in
Bull, there was no dispute that
the court in which we allowed the doctrine of equitable recoupment
to be raised had jurisdiction
Page 494 U. S. 608
over the underlying action: the trust's timely action for a
refund of income tax.
In sum, our decisions in
Bull and
Stone stand
only for the proposition that a party litigating a tax claim in a
timely proceeding may, in that proceeding, seek recoupment of a
related, and inconsistent, but now time-barred tax claim relating
to the same transaction. In both cases, there was no question but
that the courts in which the refund actions were brought had
jurisdiction. To date, we have not allowed equitable recoupment to
be the sole basis for jurisdiction.
C
Under settled principles of sovereign immunity,
"the United States, as sovereign, 'is immune from suit, save as
it consents to be sued . . . and the terms of its consent to be
sued in any court define that court's jurisdiction to entertain the
suit.'"
United States v. Testan, 424 U.
S. 392,
424 U. S. 399
(1976) (quoting
United States v. Sherwood, 312 U.
S. 584,
312 U. S. 586
(1941)). A statute of limitations requiring that a suit against the
Government be brought within a certain time period is one of those
terms.
See United States v. Mottaz, 476 U.
S. 834,
476 U. S. 841
(1986);
Block v. North Dakota ex rel. Bd. of Univ. and School
Lands, 461 U. S. 273,
461 U. S. 287
(1983).
"[A]lthough we should not construe such a time-bar provision
unduly restrictively, we must be careful not to interpret it in a
manner that would 'extend the waiver beyond that which Congress
intended.'"
Ibid. (quoting
United States v. Kubrick,
444 U. S. 111,
444 U. S.
117-118 (1979));
Library of Congress v. Shaw,
478 U. S. 310,
478 U. S. 318
(1986);
United States v. King, 395 U. S.
1,
395 U. S. 4 (1969)
(waivers of sovereign immunity by Congress "cannot be implied but
must be unequivocally expressed").
As we have determined, our previous equitable recoupment cases
have not suspended rules of jurisdiction, and so have not deviated
from these principles. We likewise refuse Dalm's invitation to do
so here. She seeks a refund not of income tax but of gift tax on
which the return was filed and
Page 494 U. S. 609
the tax paid in December, 1976. For the District Court to have
jurisdiction over her suit for refund, Dalm was required to file a
claim for refund of the tax within three years of the time the gift
tax return was filed or two years of the time the tax was paid,
whichever period expires later.
See §§ 6511 (a), 7422(a).
[
Footnote 6] There is no
question but that she failed to do so. [
Footnote 7] Having failed to comply with the statutory
requirements
Page 494 U. S. 610
for seeking a refund, she asks us to go beyond the authority
Congress has given us in permitting suits against the Government.
If any principle is central to our understanding of sovereign
immunity, it is that the power to consent to such suits is reserved
to Congress.
Our conclusion is reinforced by the fact that Congress has
legislated a set of exceptions to the limitations period prescribed
by §§ 7422 and 6511(a). In 1938, Congress adopted what are known as
the mitigation provisions, now codified at §§ 1311-1314. These
statutes, in specified circumstances, permit a taxpayer who has
been required to pay inconsistent taxes to seek a refund of a tax
the recovery of which is otherwise barred by §§ 7422(a) and
6511(a). It is undisputed that Dalm's action does not come within
these provisions; were we to allow her to maintain a suit for
refund on the basis of equitable recoupment, we would be doing
little more than overriding Congress' judgment as to when equity
requires that there be an exception to the limitations bar.
Our holding today does not leave taxpayers in Dalm's position
powerless to invoke the doctrine of equitable recoupment. Both the
Secretary, at the administrative level,
see Rev.Rul.
71-56, 1971-1 Cum.Bull. 404 (revoking Rev.Rul. 55-226, 1955-1
Cum.Bull. 469), and a court which has jurisdiction over a timely
suit for refund may consider an equitable recoupment claim for an
earlier tax paid under an inconsistent theory on the same
transaction.
III
The Court of Appeals reasoned that recoupment should be
permitted because it effected, with respect to a single
transaction, the recovery of a tax based upon a theory
inconsistent
Page 494 U. S. 611
with the theory upon which a later tax was paid. But to permit
an independent action for recoupment because there is but one
transaction is to mistake the threshold requirement for its
rationale. It is true that our precedents allowing recoupment
pertain to cases where a single transaction is subjected to
inconsistent taxation, but the reason the statute of limitations is
not a bar in those cases is that the court has uncontested
jurisdiction to adjudicate one of the taxes in question. In such
cases, a court has the equitable power to examine and consider the
entire transaction:
"The essence of the doctrine of recoupment is stated in the
Bull case:"
"recoupment is in the nature of a defense arising out of some
feature of the transaction upon which the plaintiff's action is
grounded."
"
295 U.S.
247,
295 U. S. 262. It has never
been thought to allow one transaction to be offset against another,
but only to permit a transaction which is made the subject of suit
by plaintiff to be examined in all its aspects, and judgment to be
rendered that does justice in view of the one transaction as a
whole."
Rothensies v. Electric Storage Battery Co.,
329 U. S. 296,
329 U. S. 299
(1946).
Here the Government asserted an income tax deficiency on a
theory inconsistent with the theory upon which Dalm relied in
paying gift tax. She chose to litigate the deficiency in the Tax
Court, where she did not attempt to raise a recoupment claim.
[
Footnote 8] She cannot choose
this avenue to adjudicate the income tax consequences of the
transaction, and then seek to reopen the matter and override the
statute of limitations for the sole purpose of seeking recoupment.
The controlling jurisdictional statutes do not permit her to do
so.
The judgment of the Court of Appeals is therefore reversed.
It is so ordered.
Page 494 U. S. 612
[
Footnote 1]
Unless otherwise noted, all statutory references are to the
Internal Revenue Code of 1954 (26 U.S.C.), as amended.
[
Footnote 2]
In its opinion granting summary judgment to the Government, the
District Court had suggested that an alternative ground for
decision was that the only plausible explanation for the allocation
of the agreed income tax liability between 1976 and 1977 in the Tax
Court settlement was that the allocation reflected the previously
paid gift tax on the 1976 transfer. The Sixth Circuit held that the
District Court had erred in granting summary judgment on this
issue, giving the taxpayer an opportunity to show the parties'
intent in effecting the settlement. Accordingly, it remanded the
case for further proceedings on this issue. 867 F.2d at 312.
[
Footnote 3]
The Board of Tax Appeals, the forerunner to the United States
Tax Court, was established by the Revenue Act of 1924 as "an
independent agency in the executive branch of the Government."
Revenue Act of 1924, Pub.L. 176, § 900(k), 43 Stat. 338. Under the
Act, a taxpayer was permitted to challenge an income tax deficiency
asserted by the Commissioner, prior to paying the deficiency, by
way of a petition to the Board.
See id. §§ 274, 900;
Old Colony Trust Co. v. Commissioner, 279 U.
S. 716,
279 U. S. 721
(1929).
[
Footnote 4]
Before the enactment of the Revenue Act of 1926, there was no
direct review of Board of Tax Appeals decisions. As a result, a
taxpayer who lost in proceedings before the Board was permitted to
sue in district court or the Court of Claims for a refund after
payment of the deficiency. In effect, the refund suit, although
nominally a separate proceeding, was a mechanism by which taxpayers
could obtain review of Board decisions.
See Old Colony Trust
Co., supra, at
279 U. S.
721-722; Ferguson, Jurisdictional Problems in Federal
Tax Controversies, 48 Iowa L.Rev. 312, 350-351 (1963). The Revenue
Act of 1926 put an end to this circuitous process. First, it
provided for direct judicial review of Board decisions in the
courts of appeals. Revenue Act of 1926, ch. 27, § 1001(a), 44 Stat.
109. Second, the Act provided that, once a taxpayer had filed a
timely petition with the Board, the taxpayer generally could not
institute a new suit in another court for refund of the same tax.
Id., § 284(d), 44 Stat. 67. Under our decision in
Old
Colony Trust Co., supra, at
279 U. S.
725-728, the Act did not apply to cases where, as in
Bull, the taxpayer filed his or her petition with the
Board and the Board had not issued a decision prior to the
enactment of the Act in 1926.
See generally Andrews,
Modern-Day Equitable Recoupment and the "Two Tax Effect:" Avoidance
of the Statutes of Limitation in Federal Tax Controversies, 28
Ariz.L.Rev. 595, 599, n. 20 (1986).
[
Footnote 5]
Since
Bull, we have emphasized that a claim of
equitable recoupment will lie only where the Government has taxed a
single transaction, item, or taxable event under two inconsistent
theories.
See Rothensies v. Electric Storage Battery Co.,
329 U. S. 296,
329 U. S.
299-300 (1946);
cf. Stone v. White,
301 U. S. 532
(1937) (permitting the Government to invoke equitable recoupment as
a defense against a claim for refund of income tax paid by a trust
where there was a complete identity of interest between the trust
and the beneficiary who had received the income, and a claim
against the beneficiary for the income tax was then barred).
[
Footnote 6]
JUSTICE STEVENS calls it a fiction to cast Dalm's action as a
suit for refund. He creates instead a distinction between refund
actions and suits for funds wrongfully retained.
See post
at
494 U. S.
620-622. Neither the IRC nor our authorities support the
distinction. Section 6511(a) applies to claims for refund of a tax
"overpayment." The common sense interpretation is that a tax is
overpaid when a taxpayer pays more than is owed, for whatever
reason or no reason at all. Even in
Bull, the case upon
which the dissent relies to assert that retention of the gift tax
is unjust or fraudulent, we described the inconsistent tax as being
an "overpayment."
See, e.g., 295 U.S. at
295 U. S. 258,
295 U. S. 262,
295 U. S. 263.
The word encompasses "erroneously," "illegally," or "wrongfully"
collected taxes, as those terms are used in 28 U.S.C. § 1346(a)(1)
(1982 ed.) and § 7422(a).
There is a further statutory point. By its express language, §
7422(a) conditions a district court's authority to hear a refund
suit, regardless of whether the tax is alleged to have been
erroneously, illegally, or wrongfully collected, upon the filing of
a claim for refund. If, as even JUSTICE STEVENS appears to concede,
see post at
494 U. S. 620,
the term "overpayment" as used in § 6511(a) encompasses erroneous
or illegal collection, there is no reason to conclude that it does
not also encompass wrongful collection.
As a final matter, we note that both Dalm and the Court of
Appeals must have been misled by what JUSTICE STEVENS now thinks a
fiction. Dalm's complaint sought a "refund" of "overpaid gift
taxes," and the Court of Appeals treated the claim as one for
"recovery of a tax overpayment."
See Complaint, 2-3; 867
F.2d 305, 308 (CA6 1989). We have no doubt that these
characterizations were correct.
[
Footnote 7]
In a final attempt to bring her refund suit within the statute,
Dalm contends that her suit was timely. She argues that the gift
tax was not paid for the purposes of § 6511(a) until 1984, when it
was determined that she owed income tax on the same transaction
under an inconsistent theory. So, she asserts, her cause of action
for refund of gift tax did not arise until that time. We disagree.
The most sensible interpretation of § 6511(a) is that a tax is paid
when the taxpayer tenders payment of the tax to the IRS, not when
the taxpayer discovers that the payment was erroneous. The very
purpose of statutes of limitations in the tax context is to bar the
assertion of a refund claim after a certain period of time has
passed, without regard to whether the claim would otherwise be
meritorious. That a taxpayer does not learn until after the
limitations period has run that a tax was paid in error, and that
he or she has a ground upon which to claim a refund, does not
operate to lift the statutory bar.
[
Footnote 8]
We have no occasion to pass upon the question whether Dalm could
have raised a recoupment claim in the Tax Court.
JUSTICE STEVENS, with whom JUSTICE BRENNAN and JUSTICE MARSHALL
join, dissenting.
This is not a decision that will be much celebrated or often
cited. Few cases are affected, and not a single brief
amicus
curiae was filed. The Court reserves in a footnote an issue
that would render obsolete its holding. The case casts a shadow on
the Executive -- and on this Court -- but otherwise has no apparent
importance.
Indeed, the Court's opinion is remarkable not at all for what it
says, but rather for what it leaves unsaid. The majority's parsing
of sovereign immunity and jurisdiction masks what is the ultimate
question before us: whether a statute of limitations otherwise
barring a refund of federal income tax is tolled by Government
conduct that this Court has censured as "immoral" and tantamount to
"a fraud on the taxpayer's rights."
See Bull v. United
States, 295 U. S. 247,
295 U. S. 261
(1935). The Court today offers a jurisdictional apology when it
could -- and should -- follow the just rule of the
Bull
case.
I
This case is remarkably similar to its 55-year-old precursor.
The
Bull case involved an attempt by the Government to
collect income tax on partnership distributions received by the
estate of a deceased partner. The Commissioner of Internal Revenue
had already collected an estate tax on the distributions on the
assumption that they constituted part of the estate corpus. The
Commissioner contended, first, that the same transactions could
constitute both corpus and income, and thus be subject to both an
estate tax and an income tax, and, second, that, in any event, the
statute of limitations barred a recovery of the estate tax. This
Court rejected the Commissioner's first argument, and characterized
as follows his claim that the Government could retain the estate
tax while collecting a second tax on the same transaction pursuant
to an inconsistent theory:
Page 494 U. S. 613
"The United States, we have held, cannot, as against the claim
of an innocent party, hold his money which has gone into its
treasury by means of the fraud of its agent.
United States v.
State Bank, 96 U. S. 30. While here the money
was taken through mistake without any element of fraud, the unjust
retention is immoral and amounts in law to a fraud on the
taxpayer's rights."
295 U.S. at
295 U. S.
261.
This case involves an equally unjust retention of a previously
paid tax. The Government has collected an income tax on a transfer
of $180,000 to respondent while retaining the gift tax previously
paid on the same transfer. The Court's decision assumes, as the
summary judgment record requires, that, when the Government
compromised its claim for an income tax deficiency, it allowed
respondent no credit for the gift tax that had previously been
paid. Thus, the critical fact that made the Government's position
in
Bull immoral is present here: a single taxable event
has been subjected to two taxes on mutually inconsistent theories.
[
Footnote 2/1]
II
Even with the parallel between
Bull and this case
clearly in mind, most readers of the majority's opinion must wonder
how this case ever came before our Court, and why the majority must
recite so much law to decide it. According to the majority,
respondent chose to litigate in the Tax Court
Page 494 U. S. 614
the deficiency assessed against her, and, having made this
choice, cannot "then seek to reopen the matter and override the
statute of limitations for the sole purpose of seeking recoupment."
Ante at
494 U. S. 611.
This may seem fair enough, but also plain enough: a legal claim
that might have been settled in an earlier proceeding is usually
barred by rules of claim preclusion. If the claim is not barred by
the settlement agreement in this case, then surely the Government
can -- without any help from this Court -- avoid such problems in
the future by drafting its settlement agreements more carefully.
There is accordingly no justification for the Court's exercise of
certiorari jurisdiction in this case, a discretionary act which has
done nothing more useful than deprive the twice-taxed respondent
in this case of a remedy for a wrong done by the
Government. [
Footnote 2/2]
Two facts explain why the Government does not rely on principles
of claim preclusion as a defense in this case. The first is this:
it is undisputed by the parties to this case that the Tax Court
lacked jurisdiction to consider recoupment of
Page 494 U. S. 615
the gift tax payment against the income tax deficiency.
[
Footnote 2/3] According to the
Government, respondent cannot, and for that reason did not, raise
her equitable recoupment claim in the Tax Court: "respondent's
choice of the Tax Court forum precluded her from claiming equitable
recoupment against the income tax deficiency." Reply Brief for
United States 6. The Government acknowledges that respondent may
have had a sound claim for recoupment, but insists that to pursue
this claim she should have "paid the 1976 and 1977 income tax
deficiencies and then brought a timely refund suit in district
court or the Claims Court."
Id. at 3-4.
The second fact is this: an affluent taxpayer, but not a less
fortunate one, can pay a deficiency assessment and file suit for a
refund. It is undisputed that, if respondent had the means to do
so, she could have recovered the gift tax that had been paid in
1976 by a refund action filed after she received the notice of
income tax deficiency in 1983, even though the statute of
limitations had long since run. One might infer
Page 494 U. S. 616
from the posture of this case -- as respondent's counsel
represented to the Court -- that respondent's limited means
foreclosed this avenue of relief for her. She therefore challenged
the deficiency in the Tax Court.
These two facts explain what the majority does not: why we are
not addressing a simple case of
res judicata. It is clear
that the basis for respondent's equitable recoupment claim did not
exist until it was determined that the payment made in 1976 was
taxable as income. Thus, respondent could apparently obtain a forum
to hear her equitable recoupment claim only by seeking a refund of
the previously paid gift tax -- an action which all agree was
barred by limitations when respondent received the notice of
deficiency in 1983.
When that determination was made -- that is to say, when the
income tax case was settled -- respondent promptly asserted her
recoupment claim in the only forum available. Indeed, she filed her
claim for a gift tax refund even before the settlement agreement
was consummated. In view of the fact that the character of the 1976
transaction remained in dispute until the claim was filed, none of
the policy reasons that normally support the application of a
statute of limitations is implicated by this case.
III
The Court nevertheless denies respondent the relief devised by
the
Bull Court. Ignoring both the policies underlying the
statute of limitations and the principles of just conduct
underlying
Bull, the Court confronts respondent with the
majestic voices of "jurisdiction" and "sovereign immunity" --
voices that seem to have a haunting charm for this Court's current
majority.
The Court that decided the
Bull case reasoned not in
obeisance to these siren-like voices, but rather under the reliable
guidance of a bright star in our jurisprudence: the presumption
that for every right there should be a remedy.
See Marbury v.
Madison, 1 Cranch 137,
5 U. S. 162-163
(1803). Without
Page 494 U. S. 617
any sacrifice of technical propriety, the
Bull Court
could have found that the lapse of time had divested the Court of
Claims of jurisdiction to allow the taxpayer credit for the
previously paid estate tax. It easily avoided that unjust result,
however, by relying on the special features of the tax collection
procedures that impose burdens on the taxpayer unlike those imposed
on ordinary litigants. The net effect of its analysis was to hold
that in a refund action based on the multiple and inconsistent
taxation of a single transaction, the taxpayer is to be treated as
though she were the defendant even though she is actually the
plaintiff. [
Footnote 2/4]
I would adopt the same course in this case. By initiating a
proceeding to recover income tax based on the 1976 payment, the
Government waived the time bar that would otherwise have precluded
a claim for refund of the gift tax. Had respondent
Page 494 U. S. 618
paid the deficiency and asserted the claim for a gift tax refund
as a second count in one action, even this Court would agree that
the claim was timely. If we adopt the Court's reasoning in
Bull, it is proper to treat the second count of the refund
action as timely even when the income tax issues are litigated
before the Tax Court, because the deficiency assessment was
sufficient to put in issue the right to recoupment and to justify
treating the taxpayer as a defendant, rather than a plaintiff. If
it was not too late for the Government to litigate the tax
consequences of the 1976 payment, it should not be too late for the
taxpayer to do so. "A different result here [is] a reproach to our
jurisprudence."
United States v. State Bank, 96 U. S.
30,
96 U. S. 36
(1878).
IV
It may reasonably be said that the disposition in
Bull
involved an unusually flexible treatment of legal categories. The
rights of a plaintiff are construed by reference to the status of a
defendant so as to permit, in effect, the equitable tolling of a
limitations period. A doctrinal innovation that appears imaginative
may, however, be nothing more than the necessary expression of an
exception to a generally appropriate definition. This particular
exception deserves the status of a legal rule by virtue of our
decision in
Bull. There is no reason to retreat from the
direction of that precedent today.
There is, moreover, nothing especially sober or unflinching
about the majority's disposition of this case. Quite the contrary
is true. The majority's approach depends upon showing that this
Court is constrained by tightly drawn jurisdictional boundaries,
but, as the majority concedes, the relevant jurisdictional statute
speaks in "spacious terms."
Ante at
494 U. S. 601.
Indeed, the statute confers jurisdiction not only over 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,"
but also over any such action to recover "any sum alleged to
have been excessive or in
Page 494 U. S. 619
any manner wrongfully collected under the internal revenue
laws." 28 U.S.C. § 1346(a)(1) (1982 ed.). [
Footnote 2/5]
The majority correctly recognizes that this blanket waiver of
immunity can be converted into a jurisdictional straitjacket only
by recourse to limitations spelled out elsewhere. The majority
would find these limitations in § 7422 and § 6511(a) of the
Internal Revenue Code. The first of these provisions stipulates
that no tax refund suit
"shall be maintained . . . 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."
26 U.S.C. § 7422(a) (1982 ed.). [
Footnote 2/6] The second provision establishes a statute
of limitations applicable to actions for refund of taxes paid by
filing a return or by means of a stamp. 26 U.S.C. § 6511(a) (1982
ed.). [
Footnote 2/7] It is the
latter of these two provisions which gives the majority the
shackles it seeks: the statute of limitations in § 6511(a) is a
provision of law that, under § 7422(a), restricts the capacity of
taxpayers
Page 494 U. S. 620
to maintain suits. Denominating respondent's suit an action for
refund of overpaid gift tax, the majority declares there can be "no
doubt" that the combined operation of § 7422(a) and § 6511(a)
strips the federal courts of the jurisdiction otherwise accorded by
28 U.S.C. § 1346(a)(1) (1982 ed.) over the recoupment suit.
I have no doubt that § 6511 prescribes the statute of
limitations applicable to actions for the refund of overpaid gift
tax, and that, if this were such an action, the section would at
least support the majority's argument. This suit is not, however,
technically a suit for the refund of overpaid gift tax within the
meaning of § 6511(a). The gravamen of respondent's claim is not
that the gift tax was overpaid, but that it was unjustly retained.
According to the
Bull Court,
"[w]hile here the money was taken through mistake, without any
element of fraud, the unjust retention is immoral, and amounts in
law to a fraud on the taxpayer's rights."
295 U.S. at
295 U. S. 261.
In my opinion, a sum fraudulently retained under the internal
revenue laws is an amount included within § 1346(a)(1)'s provision
for recovery of "any sum . . . in any manner wrongfully collected
under the internal-revenue laws." The jurisdictional grant
expressly distinguishes such wrongfully collected sums from those
sums which are simply "excessive," and from taxes "erroneously or
illegally assessed or collected." These latter phrases would appear
to cover actions for refund of an overpaid gift tax, but the
payment fraudulently retained in this case is better characterized
as a "sum . . . wrongfully collected." Likewise, § 6511(a), by its
express terms, applies only to actions for refund of an
"overpayment of any tax" paid by means of a return or a stamp. It
is odd to speak of the overpayment of a fraud, and one is not
ordinarily required to file a return in order to be defrauded --
even when the sovereign is the malefactor. I conclude that,
technically speaking, this action is one for the recoupment of tax
wrongfully collected because fraudulently retained, and not for the
refund of tax overpaid. The plain language of § 1346(a)(1)
accords
Page 494 U. S. 621
jurisdiction over respondent's suit, and the terms of § 6511(a)
do not divest it. [
Footnote 2/8]
The majority's affection for plain language seems to end where its
devotion to sovereign immunity begins. [
Footnote 2/9]
Page 494 U. S. 622
The majority is able to complete its argument only by inventing
a small, but blatant, fiction: that respondent is bringing a suit
for the refund of overpaid gift tax within the meaning of 26 U.S.C.
§ 6511(a) (1982 ed.). This minor fiction is then conscripted by the
majority's strategy to serve the vainest of all legal fictions, the
doctrine of sovereign immunity. The doctrine has its origin in the
ancient myth that the "[K]ing can do no wrong."
See 1 W.
Blackstone, Commentaries *238. Whatever might be said in favor of
this polite falsehood in English law, the doctrine is an anomalous
import within our own.
See Nevada v. Hall, 440 U.
S. 410,
440 U. S.
414-415 (1979);
see also Will v. Michigan Dept. of
State Police, 491 U. S. 58,
491 U. S. 87
(1989) (STEVENS, J., dissenting). Its persistence cannot be denied,
but ought not to be celebrated. Nor should its fictive origin ever
be forgotten. There is no cause to expand the doctrine, and we do
better to interpret § 1346(a)(1) by the light of equity and with
due regard for the practicalities of revenue collection discussed
in
Bull.
To be useful, legal concepts must accommodate most disputes
without the dissonance accompanying blended categories, but must
also permit such flexibility when judgment demands it. It is not
surprising that our concepts should be stressed when the Government
taxes a citizen twice upon inconsistent theories and then subjects
the citizen to a choice among competing fora, each of which
provides only half a remedy. It is equally unsurprising, and in
fact encouraging, that such problems occur so rarely that Congress
has not made any explicit provision for them. [
Footnote 2/10]
Page 494 U. S. 623
What is surprising is that this Court believes the equitable
decision of the Court of Appeals in need of correction. The Court
today has taken discretionary jurisdiction over a case of no broad
import, and has undone equity by rendering an opinion true to
neither the spirit nor the letter of American law. The Court takes
its stand upon the grave declaration that a "distinction that has
jurisdiction as its central concept is not meaningless."
Ante at
494 U. S. 606.
I am not sure what this solemn truism means, but I do know that it
does not decide this case.
Because I am unable to discover any just reason for
distinguishing this case from
Bull, I respectfully
dissent.
[
Footnote 2/1]
Arguably, the Government's position in this case is even more
outrageous than the position it took in
Bull, because its
income tax assessment in that case was perfectly sound. In this
case, however, its income tax claim was based on the remarkable
theory that payments aggregating $313,813 constituted compensation
for respondent's services as administratrix of her former
employer's estate when the probate court had approved a total of
$37,000 as compensation for those services. I do not, however,
place any reliance on this aspect of the case, just as the Court
correctly abstains from suggesting that the harshness of its
holding is mitigated by the unresolved factual dispute about
whether the Tax Court settlement took into account the prior gift
tax payment.
See ante at
494 U. S.
600-601, n. 2.
[
Footnote 2/2]
The majority states that certiorari was granted in this case to
resolve a conflict among the Courts of Appeals. If there were such
a conflict, it would not be of sufficient importance to merit our
attention, but in fact no relevant conflict exists. The majority
correctly observes that the decision of the Court of Appeals for
the Sixth Circuit in this case agrees with that of the Court of
Appeals for the Ninth Circuit in
Kolom v. United States,
791 F.2d 762 (1986). The Court erroneously suggests that these
decisions are contrary to
O'Brien v. United States, 766
F.2d 1038 (CA7 1985).
O'Brien was not a case in which a
taxpayer sought to litigate an equitable recoupment claim in
District Court after litigating in the Tax Court the assessment
that generated the recoupment claim. In
O'Brien, the
beneficiary of an estate sought to litigate a recoupment claim
after a deficiency was assessed against, and litigated in the Tax
Court by, the estate itself. The Court of Appeals for the Seventh
Circuit held that only the estate, not the beneficiary, could
assert any available recoupment claim. 766 F.2d at 1050-1051. I do
not believe the Court of Appeals for the Seventh Circuit spoke to
the question at issue here,
see 766 F.2d at 1050, n. 15,
but to the extent it did so, its remarks were obviously dicta. The
Court thus today endorses a rule that no Court of Appeals has ever
adopted.
[
Footnote 2/3]
See Rev.Rul. 71-56, 1971-1 Cum.Bull. 404, 405 ("[T]he
Tax Court lacks jurisdiction to consider a plea of equitable
recoupment");
see also Estate of Schneider v.
Commissioner, 93 T.C. 568 (1989). In
Rothensies v.
Electric Storage Battery Co., 329 U.
S. 296,
329 U. S. 303
(1946), we cited
Commissioner v. Gooch Milling & Elevator
Co., 320 U. S. 418
(1943), for the proposition that the Tax Court has no jurisdiction
to consider recoupment. A careful reading of the
Gooch
Milling opinion, and of the relevant statute, however, will
show that it actually considered only the question of recoupment
based on an overpayment in a year other than the year in dispute. I
therefore commend the Court for its careful reservation of this
issue,
see ante at
494 U. S. 611,
n. 8. It is nevertheless appropriate to assume for purposes of
deciding the jurisdictional issue in this case that respondent's
counsel correctly believed that no recoupment could be had in the
Tax Court.
Of course, if this Court were eventually to decide the reserved
issue by holding that the Tax Court has jurisdiction to hear an
equitable recoupment claim, today's decision would become a
complete dead letter. No taxpayer would have any reason to litigate
the deficiency and the recoupment issues separately, and in any
event, a judgment upon the former would bar a subsequent suit upon
the latter under the doctrine of
res judicata.
[
Footnote 2/4]
"The ordinary defendant stands in judgment only after a hearing.
The taxpayer often is afforded his hearing after judgment and after
payment, and his only redress for unjust administrative action is
the right to claim restitution. But these reversals of the normal
process of collecting a claim cannot obscure the fact that, after
all, what is being accomplished is the recovery of a just debt owed
the sovereign. If that which the sovereign retains was unjustly
taken in violation of its own statute, the withholding is wrongful.
Restitution is owed the taxpayer. Nevertheless he may be without a
remedy. But we think this is not true here."
"In a proceeding for the collection of estate tax, the United
States, through a palpable mistake, took more than it was entitled
to. Retention of the money was against morality and conscience. But
claim for refund or credit was not presented or action instituted
for restitution within the period fixed by the statute of
limitations. If nothing further had occurred, Congressional action
would have been the sole avenue of redress."
"
* * * *"
"To the objection that the sovereign is not liable to respond to
the petitioner the answer is that it has given him a right of
credit or refund, which, though he could not assert it in an action
brought by him in 1930, had accrued and was available to him, since
it was actionable and not barred in 1925 when the Government
proceeded against him for the collection of income tax."
"The pleading was sufficient to put in issue the right to
recoupment."
Bull v. United States, 295 U.
S. 247,
295 U. S.
260-261,
295 U. S. 263
(1935).
[
Footnote 2/5]
The provision reads:
"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."
28 U.S.C. § 1346(a)(1) (1982 ed.).
[
Footnote 2/6]
The majority quotes this provision in its entirety.
See
ante at
494 U. S.
601-602.
[
Footnote 2/7]
The provision reads:
"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 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) (1982 ed.).
[
Footnote 2/8]
The income tax deficiency was assessed against respondent in
June, 1983. In November, 1984, respondent filed an administrative
claim seeking relief from the inconsistent tax treatment of the
transaction. This suit followed in September, 1985. The suit would
thus be timely even if the 2-year limitations period from § 6511(a)
were borrowed and applied to claims arising out of a "wrongful
collection" resulting from inconsistent taxation.
[
Footnote 2/9]
Respondent's complaint identifies this action as one for
"recovery of Internal Revenue taxes and interest erroneously
collected from" respondent, and alleges that "overpaid gift taxes"
are due and owing to respondent. Respondent filed with the Internal
Revenue Service claims for refund of overpaid gift tax. I do not,
however, understand the majority to rely upon these details of the
pleadings. Nor could it reasonably do so. As the Government's
handling of this case makes clear, it understood the basis for
respondent's cause of action. That basis is, moreover, evident from
the face of the complaint, which alleges that:
"4. It is inequitable for Defendant to collect taxes on the same
fund on the mutually exclusive theories of said amount of money
being both income and a gift."
"5. Accordingly, timely Claims for Refund was [
sic]
filed on November 1, 1984. . . ."
"
* * * *"
"7. The action of the Defendant, through its agents, in
assessing and collecting the amounts referred to in Paragraph 2
[alleging the payment of gift taxes in 1976 and 1977] hereof was
improper, illegal and erroneous."
Nowhere does the complaint allege that the gift tax was
collected as the result of erroneous calculations, mistaken facts,
or misinterpreted provisions of law. The sole reason given for
recognizing the gift tax as an "overpayment" is that its retention
would be "inequitable."
If indeed the premise for the majority's holding is an
especially strict rule of pleading, then the majority's holding
becomes not simply trivial, but absurd. The pleading rule imposed
certainly does not have "jurisdiction as its central concept," and
thus would, even by the majority's logic, be a "
meaningless
procedural distinction.'" See ante at 494 U. S. 606.
Cf. United States v. Kales, 314 U.
S. 186, 314 U. S. 194
(1941) ("This Court . . . has often held that a notice fairly
advising the Commissioner of the nature of the taxpayer's claim,
which the Commissioner could reject because too general or because
it does not comply with formal requirements of the statute and
regulations, will nevertheless be treated as a claim, where formal
defects and lack of specificity have been remedied by amendment
filed after the lapse of the statutory period").
[
Footnote 2/10]
The majority supposes that its "conclusion is reinforced by the
fact that Congress has legislated a set of exceptions to the
limitations period" which "permit a taxpayer who has been required
to pay inconsistent taxes to seek a refund of a tax the recovery of
which is otherwise barred."
See ante at
494 U. S. 610.
The exceptions were enacted two years after
Bull was
decided. It is undisputed that these exceptions do not apply in
this case. Unlike the majority, I am not persuaded that, because
Congress took special steps to ensure that twice-taxed citizens
were treated equitably under some circumstances, Congress must have
intended to gut judicially created doctrines which ensured
equitable treatment for twice-taxed citizens under other
circumstances. The contrary inference seems more plausible.
See Andrews, Modern-Day Equitable Recoupment and the "Two
Tax Effect:" Avoidance of the Statutes of Limitation in Federal Tax
Controversies, 28 Ariz.L.Rev. 595, 619-623 (1986).